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The retailer’s optimal decision on order quantity and credit periods under two-level trade credit policy

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Abstract

In this paper, we propose an inventory model under two-level trade credit policy, where the supplier offers quantity discounts and allows the retailer to choose the period of delay in payments that determines the unit purchasing cost, and so retailer’s unit purchasing cost is a function of both ordering quantity and his/her allowed credit period. Furthermore, the demand function is relevant to the credit period offered by the retailer to his/her customers. Our objective here is to maximize the retailer’s total profit per unit time by solving the optimal decision on ordering quantity and two credit periods. An effective algorithm is developed to determine the optimal solution to the problem. Numerical examples are provided to illustrate the impact of the model parameters on the optimal solutions.

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Acknowledgments

We are thankful to the editor and the anonymous referees for their valuable comments and suggestions that help to improve the presentation and the quality of this paper. This research was supported in part by the National Natural Science Foundation of China (Grant Nos. 61379014 and 71302112).

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Authors and Affiliations

  1. Department of Mathematics, Tianjin University, Tianjin, 300072, China

    Fei Hu

  2. School of Electrical and Electronic Engineering, The University of Adelaide, Adelaide, SA, 5005, Australia

    Cheng-Chew Lim

  3. Southampton Statistical Sciences Research Institute, University of Southampton, Southampton, SO17 1BJ, UK

    Zudi Lu

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  1. Fei Hu
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  2. Cheng-Chew Lim
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  3. Zudi Lu
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Correspondence to Fei Hu.

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Hu, F., Lim, CC. & Lu, Z. The retailer’s optimal decision on order quantity and credit periods under two-level trade credit policy. J Glob Optim 62, 833–852 (2015). https://doi.org/10.1007/s10898-014-0258-z

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  • DOI: https://doi.org/10.1007/s10898-014-0258-z

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