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A multi-item supply chain with credit periods and weight freight cost discounts

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  • Tsao, Yu-Chung
  • Sheen, Gwo-Ji

Abstract

It is possible to realize considerable savings by aggregating the replenishment of a variety of items in a multi-item supply chain. This joint multi-item replenishment policy has already been widely applied in a variety of industries. This type of policy may make it possible for the retailer to take advantage of transport economies of scale by the utilization of freight discounts for greater weight. In addition, a supplier will often extend forward financing to a retailer. In this paper, a multi-item supply chain with a credit period and weight freight cost discounts is considered. The retailer bears the freight costs, but the freight carrier provides freight-transport discounts that are positively related to the weight of the cargo transported. From both the individual and the channel perspectives, we deal with the dual problems of determining the ideal supplier credit period, and of the best way for the retailer to make multi-item replenishment and pricing decisions, while still maximizing profits. We outline the optimal properties and develop algorithms for solving the problems described, as well as discuss the impact of the freight cost discounts, the inventory holding cost, and the interest rate on the behavior of both parties.

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  • Tsao, Yu-Chung & Sheen, Gwo-Ji, 2012. "A multi-item supply chain with credit periods and weight freight cost discounts," International Journal of Production Economics, Elsevier, vol. 135(1), pages 106-115.
    • Handle: RePEc:eee:proeco:v:135:y:2012:i:1:p:106-115
    DOI: 10.1016/j.ijpe.2010.11.013
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    3. Huang, Di & Ouyang, Lian Qun & Zhou, Hong, 2012. "Note on: Managing multi-echelon multi-item channels with trade allowances under credit period," International Journal of Production Economics, Elsevier, vol. 138(1), pages 117-124.
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    6. Gaurav Nagpal & Udayan Chanda & Himanshu Seth & Namita Ruparel, 2022. "Inventory Replenishment Policies for Two Successive Generations of Technology Products Under Permissible Delay in Payments," International Journal of Information Systems and Supply Chain Management (IJISSCM), IGI Global, vol. 15(1), pages 1-29, January.
    7. Cortés, Pablo & Muñuzuri, Jesús & Guadix, José & Onieva, Luis, 2013. "Optimal algorithm for the demand routing problem in multicommodity flow distribution networks with diversification constraints and concave costs," International Journal of Production Economics, Elsevier, vol. 146(1), pages 313-324.
    8. Liao, Jui-Jung & Huang, Kuo-Nan & Chung, Kun-Jen, 2012. "Lot-sizing decisions for deteriorating items with two warehouses under an order-size-dependent trade credit," International Journal of Production Economics, Elsevier, vol. 137(1), pages 102-115.
    9. Gongbing Bi & Lei Song & Yalei Fei, 2020. "Dynamic mixed-item inventory control with limited capital and short-term financing," Annals of Operations Research, Springer, vol. 284(1), pages 99-130, January.
    10. Monalisha Pattnaik & Padmabati Gahan, 2021. "Preservation effort effects on retailers and manufacturers in integrated multi-deteriorating item discrete supply chain model," OPSEARCH, Springer;Operational Research Society of India, vol. 58(2), pages 276-329, June.
    11. Pal, Brojeswar & Sana, Shib Sankar & Chaudhuri, Kripasindhu, 2012. "A three layer multi-item production–inventory model for multiple suppliers and retailers," Economic Modelling, Elsevier, vol. 29(6), pages 2704-2710.
    12. Deepak Singhal & Sarat Kumar Jena & Satyabrata Aich & Sushanta Tripathy & Hee-Cheol Kim, 2021. "Remanufacturing for Circular Economy: Understanding the Impact of Manufacturer’s Incentive under Price Competition," Sustainability, MDPI, vol. 13(21), pages 1-19, October.
    13. Armin Jabbarzadeh & Leyla Aliabadi & Reza Yazdanparast, 2021. "Optimal payment time and replenishment decisions for retailer’s inventory system under trade credit and carbon emission constraints," Operational Research, Springer, vol. 21(1), pages 589-620, March.
    14. A. Thangam, 2017. "Retailer’s optimal replenishment policy in a two-echelon supply chain under two-part delay in payments and disruption in delivery," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(1), pages 26-46, January.
    15. Qiu, Xuan & Lee, Chung-Yee, 2019. "Quantity discount pricing for rail transport in a dry port system," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 563-580.
    16. Gour Chandra Mahata & Sujit Kumar De, 2016. "An EOQ inventory system of ameliorating items for price dependent demand rate under retailer partial trade credit policy," OPSEARCH, Springer;Operational Research Society of India, vol. 53(4), pages 889-916, December.
    17. Yu-Chung Tsao & Qinhong Zhang & Tsung-Hui Chen, 2016. "Multi-item distribution network design problems under volume discount on transportation cost," International Journal of Production Research, Taylor & Francis Journals, vol. 54(2), pages 426-443, January.

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