An inventory model for increasing demand under two levels of trade credit linked to order quantity |
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Authors: | Jinn-Tsair Teng Hui-Ling Yang Maw-Sheng Chern |
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Institution: | 1. Department of Marketing and Management Sciences, The William Paterson University of New Jersey, Wayne, NJ 07470-2103, USA;2. Department of Computer Science and Information Engineering, HungKuang University, 34, Chung-Chie Road, Shalu, Taichung 43302, Taiwan, ROC;3. Department of Industrial Engineering and Engineering Management, National Tsing Hua University, Hsinchu 30013, Taiwan, ROC |
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Abstract: | During the growth stage of a product life cycle especially for high-tech products, the demand function increases with time. In this paper, we extend the constant demand to a linear non-decreasing demand function of time and incorporate a permissible delay in payment under two levels of trade credit into the model. The supplier offers a permissible delay linked to order quantity, and the retailer also provides a downstream trade credit period to its customers. The objective is to find the optimal replenishment cycle that minimizes the retailer’s annual total relevant cost per unit time. The condition for an optimal solution to the generalized model is presented and some fundamental theoretical results are established. Finally, numerical examples to illustrate the proposed model are provided. Sensitivity analysis is performed and some relevant managerial insights are obtained. |
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Keywords: | Inventory Increasing demand Trade credits Order quantity Finance |
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