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Channel coordination, trade credit and quantity discounts for freight cost

Author

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  • Sheen, Gwo-Ji
  • Tsao, Yu-Chung

Abstract

In this paper we consider vendor-buyer channels subject to trade credit and quantity discounts for freight cost. We deal with the problems of determining the vendor's credit period, the buyer's retail price and order quantity while still maximizing profits. We focus on how channel coordination can be achieved using trade credit and how trade credit can be affected by quantity discounts for freight cost. We show that profits for both parties increase under channel coordination when the credit period is kept within an appropriate range. This range becomes wider as the discount for freight rates increases.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:transe:v:43:y:2007:i:2:p:112-128
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    Citations

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    Cited by:

    1. Mohammad Reza Gholamian & Mahdi Ebrahimzadeh-Afruzi, 2021. "Credit and discount incentive options for two-level supply chain coordination, under uncertain price-dependent demand," Operational Research, Springer, vol. 21(4), pages 2283-2307, December.
    2. 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.
    3. Mutlu, Fatih & Çetinkaya, Sıla, 2020. "Supplier–carrier–buyer channels: Contractual pricing for a carrier serving a supplier–buyer partnership," International Journal of Production Economics, Elsevier, vol. 230(C).
    4. Tsao, Yu-Chung, 2010. "Managing multi-echelon multi-item channels with trade allowances under credit period," International Journal of Production Economics, Elsevier, vol. 127(2), pages 226-237, October.
    5. 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.
    6. Zhang, Baofeng & Wu, Desheng Dash & Liang, Liang, 2018. "Trade credit model with customer balking and asymmetric market information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 110(C), pages 31-46.
    7. 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.
    8. S. Çetinkaya & Y. Zhang & E. Akçalı, 2017. "Vendor-buyer inventory problem revisited: modeling random yield and trade credit," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1265-1278, October.
    9. Tsao, Yu-Chung, 2019. "Coordinating contracts under default risk control-based trade credit," International Journal of Production Economics, Elsevier, vol. 212(C), pages 168-175.
    10. Chun-Chin Wei & Liang-Tu Chen, 2021. "Supply Chain Replenishment Decision for Newsvendor Products with Multiple Periods and a Short Life Cycle," Sustainability, MDPI, vol. 13(22), pages 1-13, November.
    11. Tsao, Yu-Chung & Lu, Jye-Chyi, 2012. "A supply chain network design considering transportation cost discounts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 401-414.
    12. Haoyu Liu & Shulin Liu, 2020. "Research on Advertising and Quality of Paid Apps, Considering the Effects of Reference Price and Goodwill," Mathematics, MDPI, vol. 8(5), pages 1-23, May.
    13. Shuangsheng Wu & Qi Li, 2021. "Emergency Quantity Discount Contract with Suppliers Risk Aversion under Stochastic Price," Mathematics, MDPI, vol. 9(15), pages 1-12, July.
    14. Yu-Chung Tsao, 2015. "A piecewise nonlinear optimization for a production-inventory model under maintenance, variable setup costs, and trade credits," Annals of Operations Research, Springer, vol. 233(1), pages 465-481, October.
    15. Du, Ruo & Banerjee, Avijit & Kim, Seung-Lae, 2013. "Coordination of two-echelon supply chains using wholesale price discount and credit option," International Journal of Production Economics, Elsevier, vol. 143(2), pages 327-334.
    16. Cobb, Barry R. & Johnson, Alan W., 2014. "A note on supply chain coordination for joint determination of order quantity and reorder point using a credit option," European Journal of Operational Research, Elsevier, vol. 233(3), pages 790-794.
    17. Moon, Ilkyeong & Dey, Kartick & Saha, Subrata, 2018. "Strategic inventory: Manufacturer vs. retailer investment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 109(C), pages 63-82.
    18. Tsao, Yu-Chung, 2017. "Managing default risk under trade credit: Who should implement Big-Data analytics in supply chains?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 276-293.
    19. Yu-Jen Lin & Chia-Huei Ho, 2011. "Integrated inventory model with quantity discount and price-sensitive demand," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 19(1), pages 177-188, July.
    20. Yu-Chung Tsao, 2010. "Two-phase pricing and inventory management for deteriorating and fashion goods under trade credit," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 72(1), pages 107-127, August.
    21. Yu-Chung Tsao & Qinhong Zhang & Hui-Ping Fang & Pei-Ling Lee, 2019. "Two-tiered pricing and ordering for non-instantaneous deteriorating items under trade credit," Operational Research, Springer, vol. 19(3), pages 833-852, September.
    22. Gahm, Christian & Brabänder, Christian & Tuma, Axel, 2017. "Vehicle routing with private fleet, multiple common carriers offering volume discounts, and rental options," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 97(C), pages 192-216.
    23. Chen, Liang-Hsuan & Kang, Fu-Sen, 2010. "Coordination between vendor and buyer considering trade credit and items of imperfect quality," International Journal of Production Economics, Elsevier, vol. 123(1), pages 52-61, January.

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