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Retailer's optimal order and credit policies when a supplier offers either a cash discount or a delay payment linked to order quantity

Author

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  • Chih-Te Yang
  • Qinhua Pan
  • Liang-Yuh Ouyang
  • Jinn-Tsair Teng

Abstract

To increase sales and reduce default risks, a supplier may offer its retailers either: 1) a cash discount; 2) a fixed credit period M if the order quantity is greater than or equal to a predetermined quantity W. Likewise, a retailer in turn offers its customers a credit period N, which has a positive impact on its demand but a negative impact on its default risks. In this paper, we establish an inventory model for a retailer in a supply chain when a supplier offers either a cash discount or a delay payment linked to order quantity; meanwhile it offers its customers a permissible delay in payments. Then, we derive several theoretical results to determine the optimal solution under various situations and develop an algorithm to solve this complex inventory problem. Finally, several numerical examples are given to illustrate the theoretical results and provide some managerial insights. [Received 9 April 2011; Revised 14 August 2011; Accepted 21 October 2011]

Suggested Citation

  • Chih-Te Yang & Qinhua Pan & Liang-Yuh Ouyang & Jinn-Tsair Teng, 2013. "Retailer's optimal order and credit policies when a supplier offers either a cash discount or a delay payment linked to order quantity," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 7(3), pages 370-392.
    • Handle: RePEc:ids:eujine:v:7:y:2013:i:3:p:370-392
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    Citations

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    Cited by:

    1. Ping Ruan & Yung-Fu Huang & Ming-Wei Weng, 2022. "Impact of COVID-19 on Supply Chains: A Hybrid Trade Credit Policy," Mathematics, MDPI, vol. 10(8), pages 1-22, April.
    2. Shizhen Bai & Na Xu, 2016. "The online seller's optimal price and inventory policies under different payment schemes," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 10(3), pages 285-300.
    3. Vandana, & Sharma, B.K., 2016. "An EOQ model for retailers partial permissible delay in payment linked to order quantity with shortages," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 125(C), pages 99-112.
    4. Li, Ruihai & Skouri, Konstantina & Teng, Jinn-Tsair & Yang, Wen-Goang, 2018. "Seller's optimal replenishment policy and payment term among advance, cash, and credit payments," International Journal of Production Economics, Elsevier, vol. 197(C), pages 35-42.
    5. Pourmohammad Zia, Nadia & Taleizadeh, Ata Allah, 2015. "A lot-sizing model with backordering under hybrid linked-to-order multiple advance payments and delayed payment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 82(C), pages 19-37.
    6. R. Sundara rajan & R. Uthayakumar, 2017. "Comprehensive solution procedure for optimizing replenishment policies of instantaneous deteriorating items with stock-dependent demand under partial trade credit linked to order quantity," 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(2), pages 1343-1373, November.
    7. Jing Zhang & Na Xu & Shizhen Bai, 2021. "The optimal pricing decisions for e-tailers with different payment schemes," Electronic Commerce Research, Springer, vol. 21(4), pages 955-982, December.
    8. Tiwari, Sunil & Cárdenas-Barrón, Leopoldo Eduardo & Khanna, Aditi & Jaggi, Chandra K., 2016. "Impact of trade credit and inflation on retailer's ordering policies for non-instantaneous deteriorating items in a two-warehouse environment," International Journal of Production Economics, Elsevier, vol. 176(C), pages 154-169.

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