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Improving the supply chain's performance through trade credit under inventory-dependent demand and limited storage capacity

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  • Zhong, Yuan-Guang
  • Zhou, Yong-Wu

Abstract

The present paper develops a performance-improving model through trade credit for a two-echelon supply chain, where a supplier sells a single product through a retailer who has limited storage space and faces an inventory-dependent end demand. We consider the non-integrated and integrated optimizing model. Under the non-integrated optimizing model, we present how the supplier determines the trade credit period to induce the retailer ordering more so as to reduce the supplier's operating cost and enhance sales volume of products as well. The proposed model shows that the presented trade credit policy can increase each member's profitability but also the profitability of the whole channel. Furthermore, we develop a theorem to efficiently determine the optimal inventory and trade credit policy for the integrated optimizing model.

Suggested Citation

  • Zhong, Yuan-Guang & Zhou, Yong-Wu, 2013. "Improving the supply chain's performance through trade credit under inventory-dependent demand and limited storage capacity," International Journal of Production Economics, Elsevier, vol. 143(2), pages 364-370.
    • Handle: RePEc:eee:proeco:v:143:y:2013:i:2:p:364-370
    DOI: 10.1016/j.ijpe.2012.07.013
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    8. Zhou, Yong-Wu & Zhong, Yuanguang & Li, Jicai, 2012. "An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space," European Journal of Operational Research, Elsevier, vol. 223(1), pages 76-85.
    9. Soni, Hardik & Shah, Nita H., 2008. "Optimal ordering policy for stock-dependent demand under progressive payment scheme," European Journal of Operational Research, Elsevier, vol. 184(1), pages 91-100, January.
    10. Sheen, Gwo-Ji & Tsao, Yu-Chung, 2007. "Channel coordination, trade credit and quantity discounts for freight cost," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(2), pages 112-128, March.
    11. Chung, Kun-Jen & Liao, Jui-Jung, 2009. "The optimal ordering policy of the EOQ model under trade credit depending on the ordering quantity from the DCF approach," European Journal of Operational Research, Elsevier, vol. 196(2), pages 563-568, July.
    12. Luo, Jianwen, 2007. "Buyer-vendor inventory coordination with credit period incentives," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 143-152, July.
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    Cited by:

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    2. Chandra K. Jaggi & Mamta Gupta & Amrina Kausar & Sunil Tiwari, 2019. "Inventory and credit decisions for deteriorating items with displayed stock dependent demand in two-echelon supply chain using Stackelberg and Nash equilibrium solution," Annals of Operations Research, Springer, vol. 274(1), pages 309-329, March.
    3. Alamri, Adel A. & Syntetos, Aris A., 2018. "Beyond LIFO and FIFO: Exploring an Allocation-In-Fraction-Out (AIFO) policy in a two-warehouse inventory model," International Journal of Production Economics, Elsevier, vol. 206(C), pages 33-45.
    4. Jafar Heydari, 2015. "Coordinating replenishment decisions in a two-stage supply chain by considering truckload limitation based on delay in payments," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(10), pages 1897-1908, July.
    5. Xu, Xinhan & Chen, Xiangfeng & Jia, Fu & Brown, Steve & Gong, Yu & Xu, Yifan, 2018. "Supply chain finance: A systematic literature review and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 204(C), pages 160-173.
    6. Yangyang Huang & Zhenyang Pi & Weiguo Fang, 2021. "Trade Credit with Barter in a Capital-Constrained Supply Chain," Sustainability, MDPI, vol. 13(20), pages 1-15, October.
    7. Soni, Hardik N, 2013. "Optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment," International Journal of Production Economics, Elsevier, vol. 146(1), pages 259-268.
    8. Wu, Yang & Wang, Ziyang & Yao, Jianming & Guo, Haixiang, 2023. "Joint decision of order allocation and lending in the multi-supplier scenario purchase order financing," International Journal of Production Economics, Elsevier, vol. 255(C).
    9. Chandra K. Jaggi & Sunil Tiwari & Satish K. Goel, 2017. "Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities," Annals of Operations Research, Springer, vol. 248(1), pages 253-280, January.
    10. Xie, Xiaofeng & Shi, Xinyu & Gu, Jing & Xu, Xun, 2023. "Examining the Contagion Effect of Credit Risk in a Supply Chain under Trade Credit and Bank Loan Offering," Omega, Elsevier, vol. 115(C).
    11. Tiwari, Sunil & Jaggi, Chandra K. & Gupta, Mamta & Cárdenas-Barrón, Leopoldo Eduardo, 2018. "Optimal pricing and lot-sizing policy for supply chain system with deteriorating items under limited storage capacity," International Journal of Production Economics, Elsevier, vol. 200(C), pages 278-290.
    12. Ali Akbar Shaikh & Leopoldo Eduardo Cárdenas-Barrón & Amalesh Kumar Manna & Armando Céspedes-Mota & Gerardo Treviño-Garza, 2021. "Two Level Trade Credit Policy Approach in Inventory Model with Expiration Rate and Stock Dependent Demand under Nonzero Inventory and Partial Backlogged Shortages," Sustainability, MDPI, vol. 13(23), pages 1-19, December.
    13. Huang, Jing & Yang, Wensheng & Tu, Yiliu, 2020. "Financing mode decision in a supply chain with financial constraint," International Journal of Production Economics, Elsevier, vol. 220(C).
    14. Dong, Ciwei & Huang, Qianzhi & Fang, Debin, 2023. "Channel selection and pricing strategy with supply chain finance and blockchain," International Journal of Production Economics, Elsevier, vol. 265(C).

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