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Optimal retailer's ordering policies in the EOQ model under trade credit financing

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  • Y-F Huang

    (Chaoyang University of Technology)

Abstract

The main purpose of this note is to modify the assumption of the trade credit policy in previously published results to reflect the real-life situations. All previously published models implicitly assumed that the supplier would offer the retailer a delay period, but the retailer would not offer the trade credit period to his/her customer. In most business transactions, this assumption is debatable. In this note, we assume that the retailer also adopts the trade credit policy to stimulate his/her customer demand to develop the retailer's replenishment model. Furthermore, we assume that the retailer's trade credit period offered by supplier M is not shorter than the customer's trade credit period offered by retailer N(M⩾N). Under these conditions, we model the retailer's inventory system as a cost minimization problem to determine the retailer's optimal ordering policies. Then a theorem is developed to determine efficiently the optimal ordering policies for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorem obtained in this note.

Suggested Citation

  • Y-F Huang, 2003. "Optimal retailer's ordering policies in the EOQ model under trade credit financing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(9), pages 1011-1015, September.
    • Handle: RePEc:pal:jorsoc:v:54:y:2003:i:9:d:10.1057_palgrave.jors.2601588
    DOI: 10.1057/palgrave.jors.2601588
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    References listed on IDEAS

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    1. Jamal, A. M. M. & Sarker, Bhaba R. & Wang, Shaojun, 2000. "Optimal payment time for a retailer under permitted delay of payment by the wholesaler," International Journal of Production Economics, Elsevier, vol. 66(1), pages 59-66, June.
    2. Liao, Hung-Chang & Tsai, Chih-Hung & Su, Chao-Ton, 2000. "An inventory model with deteriorating items under inflation when a delay in payment is permissible," International Journal of Production Economics, Elsevier, vol. 63(2), pages 207-214, January.
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    Cited by:

    1. Prasenjit Pramanik & Manas Kumar Maiti & Manoranjan Maiti, 2018. "An appropriate business strategy for a sale item," OPSEARCH, Springer;Operational Research Society of India, vol. 55(1), pages 85-106, March.
    2. Kumar Maiti, Manas, 2011. "A fuzzy genetic algorithm with varying population size to solve an inventory model with credit-linked promotional demand in an imprecise planning horizon," European Journal of Operational Research, Elsevier, vol. 213(1), pages 96-106, August.
    3. Fei Hu & Cheng-Chew Lim & Zudi Lu, 2015. "The retailer’s optimal decision on order quantity and credit periods under two-level trade credit policy," Journal of Global Optimization, Springer, vol. 62(4), pages 833-852, August.

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