Optimal Ordering Strategy of a Replenishment Policy for Deteriorating Items Under Retailer’s Partial Trade Credit Policy (original) (raw)
Related papers
Expert Systems with Applications, 2012
The main purpose of this paper is to investigate the optimal retailer's replenishment decisions for deteriorating items under two levels of trade credit policy to reflect supply chain management situation within the economic production quantity (EPQ) framework. In this paper, it is assumed that the retailer maintains a powerful decision-making right and can obtain the full trade credit offered by the supplier yet retailer just offers the partial trade credit to his/her customers. Under these conditions, the retailer can obtain the most benefits. Then, we model the retailer's inventory system as a cost minimization problem to determine the retailer's optimal replenishment decisions under the supply chain management. Some easy-to-use theorems are developed to efficiently determine the optimal replenishment decisions for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorems obtained in this paper. Then, as well as, we obtain a lot of managerial phenomena from numerical examples.
Applied Mathematical Modelling, 2014
The retail inventory management literature generally assumes that suppliers seek to stimulate demand by offering retailers a delay in payment. In practice, however, suppliers tend to offer retailers a partial delay in payment. To accommodate this possibility, this paper establishes an economic order quantity model for deteriorating items, with allowable shortages and permissible partial delays in payment based on the order quantity. This paper presents theoretical results to determine the optimal replenishment time and the length of time for the stock to draw down completely, and with these time values the optimal ordering and backlogging policies are calculated for the retailer in order to minimize the total inventory cost per unit time. The optimal solutions are obtained analytically. The inventory model is validated numerically. A sensitivity analysis of the optimal solution with respect to the parameters of the inventory system and managerial insights are given. The proposed inventory model reduces to some existing inventory models.
RAIRO - Operations Research, 2019
In this study one obtained the optimal decision of a retailer for the replenishment rate with selling-price and credit-period dependent demand to maximize the profit. A time-varying deterioration rate was considered for those products. A credit-period was offered by the retailer to the end customer to settle the whole payments. The aim of the model was to obtain the maximum profit for the retailer based model. A solution methodology with an algorithm was used to obtain the global optimum profit. An illustrative numerical example was given to test the practical applicability of the model. Numerical study indicated that the profit was at a maximum when the permissible delay-period for payment offered by the suppliers was lies between the permissible delay-time, and the cycle time, offered by the retailer.
RAIRO - Operations Research, 2019
In this study one obtained the optimal decision of a retailer for the replenishment rate with selling-price and credit-period dependent demand to maximize the profit. A time-varying deterioration rate was considered for those products. A credit-period was offered by the retailer to the end customer to settle the whole payments. The aim of the model was to obtain the maximum profit for the retailer based model. A solution methodology with an algorithm was used to obtain the global optimum profit. An illustrative numerical example was given to test the practical applicability of the model. Numerical study indicated that the profit was at a maximum when the permissible delay-period for payment offered by the suppliers was lies between the permissible delay-time, and the cycle time, offered by the retailer.
2018
In this paper, an inventory model for deteriorating items with selling price and credit period sensitive demand is developed. The inventory system deals with products which have a fixed expiry date after which the product cannot be sold. Here, a permissible delay period is allowed by the supplier to the retailer to pay all his dues, but if the retailer doesn't pay the entire amount at the end of the delay period, an interest will be charged on the remaining dues. The shortages are also allowed and partially backlogged. This paper provides a procedure to develop the total retailer's profit function per unit time of the system and optimal ordering quantity per cycle for the retailer. Finally, the model is illustrated with numerical examples.
Journal of Mathematical Modelling and Algorithms in Operations Research, 2015
In a supplier-retailer-customer supply chain, a credit-worthy retailer frequently receives a permissible delay on the entire purchase amount without collateral deposits from his/her supplier (i.e., an upstream full trade credit). By contrast, a retailer usually requests his/her credit-risk customers to pay a fraction of the purchase amount at the time of placing an order, and then grants a permissible delay on the remaining balance (i.e., a downstream partial trade credit). Also, in selecting an item for use, the selling price of that item is one of the decisive factors to the customers. It is well known that the higher selling price of item decreases the demand rate of that item where the lesser price has the reverse effect. Hence, the demand rate of an item is dependent on the selling price of that item. In addition, many products such as fruits, vegetables, high-tech products, pharmaceuticals, and volatile liquids not only deteriorate continuously due to evaporation, obsolescence and spoilage but also have their expiration dates. However, only a few researchers take the expiration date of a deteriorating item into consideration. This paper proposes an economic order quantity model to allow for: (a) the strategy that supplier offers retailer a full trade credit policy whereas the retailer offers their customers a partial trade credit policy, (b) selling price dependent demand rate, (c) a profit maximization objective and (d) deteriorating items not only deteriorate continuously but also have their expiration dates. For the objective function sufficient conditions for the existence and uniqueness of the optimal solution are provided. An efficient algorithm is designed to determine the optimal pricing and inventory policies for the retailer. Finally, numerical examples are presented to illustrate the proposed model and the effect of key parameters on optimal solution is examined.
Uncertain Supply Chain Management
Trade credit mainly signifies increase in order quantity when retailer offers a trade credit to the customer. From the customer's view, granting trade credit not only increases sales and revenue but also increases opportunity cost. So, the choice to offer trade credit is an important managerial consideration. Moreover another significant decision on purchasing is to include (or not to include) cash discount benefits and the motivations behind it. Therefore, the major objective of this article is to derive the inventory models for deteriorating items by maximizing the total profit of the retailer. The models includes the cash discount for the retailer depending on ordering quantity and also cash discount for the customer depending on the time. The customer's demand is expressed as a function of time and price, which is appropriate for the products for which demand increases initially and after sometime it starts to decrease. Lastly, numerical examples along with sensitivity analysis are done, which extracts some fruitful managerial insights.
2013
In this article, an attempt is made to analyze the effect of credit period for order of pre-specific units by the vendor. The joint system under consideration is for vendor-buyer when units in inventory are subject to deterioration at a constant rate under stock-dependent demand and order-dependent trade credit. The joint total profit is maximized with respect to buyer's order quantity and number of shipments from the vendor to the buyer during a cycle time. Numerical examples and sensitivity analysis are given to validate the mathematical model and to find critical inventory parameters. The managerial issues are discussed.
Rairo-operations Research, 2018
In this paper, we examine an optimal dynamic decision-making problem for a retailer's inventory system of deteriorating items under two-level trade credit financing where the supplier, as well as the retailer, offers trade credit to the subsequent downstream member, the demand rate of which varies simultaneously with time and the length of credit period that is offered to the customers. The deterioration rate is non-decreasing over time. In addition, the risk of default increases with the credit period length. A generalized model is presented to determine the optimal trade credit and replenishment strategies that maximize the retailer's annual total profit. We then demonstrate that the retailer's optimal credit period and replenishment cycle time not only exist but also are unique. Thus, the search of the global optimal solution reduces to finding a local solution. Finally, we run several numerical examples to illustrate the problem and gain managerial insights.
Uncertain Supply Chain Management, 2017
The player uses credit financing to perform profitable business. We analyze an economic order quantity model in which items have a fixed lifetime and deteriorate over time. The supplier offers the retailer a full credit period whenever the retailer orders more than or equal to a prespecified quantity. If the retailer orders less than pre-specified order quantity, then the retailer will do partial payment to the supplier and avail of delay in payments for the remaining outstanding amount. The demand is price-sensitive. The retailer's profit is maximized by setting appropriate retail price and replenishment time. The algorithm is developed to choose the best policy for the decision maker from the number of alternatives. Numerical data is used to validate the theoretical developments. Managerial insights are discussed. It is observed that for a given units to qualify for avail of partial credit period, increase in ordering cost decreases profit of the retailer. The increase in rate of the purchase cost to avail of delay payment suggests that to have a more profit, retailer should deplete stock before the allowable credit period.