Determination of the optimal ordering policy for the retailer with limited capitals when a supplier offers 2 levels of trade credit |
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| Authors: | Jui‐Jung Liao Kuo‐Nan Huang Kun‐Jen Chung Shy‐Der Lin Pin‐Shou Ting HM Srivastava |
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| Affiliation: | 1. Department of Business Administration, Chihlee University of Technology, Taipei, Republic of China, Taiwan;2. Department of Industrial Engineering and Management, St. John's University, Tamsui 25135, Republic of China, Taiwan;3. College of Business, Chung Yuan Christian University, Republic of China, Taiwan;4. National Taiwan University of Science and Technology, Taipei 10607, Republic of China, Taiwan;5. Department of International Business Management, Shih Chien University, Taipei 10462, Republic of China, Taiwan;6. Department of Applied Mathematics, College of Science, Chung Yuan Christian University, Republic of China, Taiwan;7. Department of Business Administration, College of Business, Chung Yuan Christian University, Republic of China, Taiwan;8. Department of Mathematics and Statistics, University of Victoria, Canada;9. Department of Medical Research, China Medical University Hospital, China Medical University, Taichung 40402, Republic of China, Taiwan |
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| Abstract: | In this article, we consider and investigate the cases when the retailer's capitals are restricted and when the supplier offers another kind of 2‐level trade credit. This means that the supplier offers 2‐level trade credit for the retailer to settle the account and the retailer's capitals are restricted, so the retailer decides to pay off the unpaid balance as follows: Firstly, the retailer decides to pay off the unpaid balance at the end of the first credit period if the retailer can pay off all accounts and, in addition, the retailer can use the sales revenue to earn interest throughout the replenishment cycle time. Secondly, the retailer decides to pay off all accounts either after the end of the first credit period, but before the second credit period, or after the second credit period if the retailer cannot pay off the unpaid balance at the end of the first credit period. Additionally, the delay will incur interest charges on the unpaid and overdue balance due to the difference between the interest earned and the interest charged. Consequently, the main purpose of this article is to characterize the optimal solution processes and (in accordance with the functional behavior of the cost function) to search for the optimal replenishment cycle time. Finally, numerical examples are given to illustrate the theoretical results which are proven in this article by means of mathematical solution procedures. |
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| Keywords: | cash discounts economic order quantity (EOQ) inventory control and integrated model inventory models and optimization mathematical solution procedures optimal ordering policy optimal replenishment cycle time quantity discounts supply chain management two‐level trade credit |
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