Optimal replenishment decision for retailers with variable demand for deteriorating products under a trade-credit policy

2020 ◽  
Vol 54 (6) ◽  
pp. 1685-1701 ◽  
Author(s):  
Biswajit Sarkar ◽  
Bikash Koli Dey ◽  
Mitali Sarkar ◽  
Sun Hur ◽  
Buddhadev Mandal ◽  
...  
Keyword(s):  
Trade Credit ◽  
Numerical Study ◽  
Global Optimum ◽  
Optimal Decision ◽  
Selling Price ◽  
Credit Policy ◽  
Credit Period ◽  
Deterioration Rate ◽  
Solution Methodology ◽  
Dependent Demand

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.

An inventory model of a three parameter Weibull distributed deteriorating item with variable demand dependent on price and frequency of advertisement under trade credit

2019 ◽  
Vol 53 (3) ◽  
pp. 903-916 ◽  
Author(s):  
Ali Akbar Shaikh ◽  
Leopoldo Eduardo Cárdenas–Barrón ◽  
Asoke Kumar Bhunia ◽  
Sunil Tiwari
Keyword(s):  
Trade Credit ◽  
Inventory Model ◽  
Selling Price ◽  
Credit Policy ◽  
Variable Demand ◽  
Reduced Gradient Method ◽  
Deterioration Rate ◽  
Rate Dependent ◽  
Reduced Gradient ◽  
Generalized Reduced Gradient

This paper develops an inventory model for a deteriorating item with variable demand dependent on the selling price and frequency of advertisement of the item under the financial trade credit policy. Shortages are allowed and these are partially backlogged with a variable rate dependent on the duration of waiting time until to the arrival of next order. In this inventory model, the deterioration rate follows a three-parameter Weibull distribution. The corresponding inventory model is formulated and solved by using the well-known generalized reduced gradient method along with an algorithm. To validate the inventory model, two numerical examples are considered and solved. Finally, based on one numerical example, the impacts of different parameters are studied by a sensitivity analysis considering one parameter at a time and leaving the other parameters fixed.

scholarly journals Optimal replenishment, pricing and preservation technology investment policies for non-instantaneous deteriorating items under two-level trade credit policy

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Chandan Mahato ◽  
Gour Chandra Mahata
Keyword(s):  
Trade Credit ◽  
Market Competition ◽  
Deteriorating Items ◽  
Credit Policy ◽  
Business World ◽  
Credit Period ◽  
Technology Investment ◽  
Deterioration Rate ◽  
Preservation Technology ◽  
Preservation Technology Investment

<p style='text-indent:20px;'>In the business world, both the supplier and the retailer accept the credit to make their business position strong, because the credit not only strengthens their business relationships but also increases the scale of their profits. In this paper, we consider an inventory model for non-instantaneous deteriorating items with price sensitive demand, time varying deterioration rate under two-level trade credit policy. Besides, to reduce deterioration rate, retailers invest some cost to prevent product degradation/decay, known as preservation technology, is also inserted. Consumption of such items within shelf life prevents to deterioration, which can be achieved by bulk sale. In order to stimulate the selling, trade-credit policy is also considered here. In the sequel, not only the supplier would offer fixed credit period to the retailer, but retailer also adopt the trade credit policy to the customers in order to promote the market competition. The retailer can accumulate revenue and interest after the customer pays for the amount of purchasing cost to the retailer until the end of the trade credit period offered by the supplier. The main objective is to determine the optimal replenishment, pricing and preservation technology investment strategies including whether or not invest in preservation technology and how much to invest in order to maximize the average profit of the system. It is proved that the optimal replenishment policy not only exists but is unique for any given selling price and preservation technology cost. An algorithm is presented to derive the optimal solutions of the model. Numerous theorems and lemmas have been inserted to obtain the optimal solution. Finally, numerical examples and managerial implications are incorporated to validate the proposed model.</p>

scholarly journals Optimal pricing, ordering, and credit period policies for deteriorating products under order-linked trade credit

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Yu-Chung Tsao ◽  
Hanifa-Astofa Fauziah ◽  
Thuy-Linh Vu ◽  
Nur-Aini Masrurohand
Keyword(s):  
Default Risk ◽  
Global Economy ◽  
Trade Credit ◽  
Solution Procedure ◽  
Selling Price ◽  
Discounted Cash Flow ◽  
Credit Period ◽  
Total Profit ◽  
Credit Financing ◽  
Dependent Demand

<p style='text-indent:20px;'>In the modern global economy, trade credit financing is typical in business transactions for both sellers and buyers. The seller offers a credit period to attract new buyers or stimulate demand, and the buyer takes the opportunity to accumulate revenue. To obtain this benefit, the seller prefers trade credit policies that are dependent on the quantity ordered, referred to as order-linked trade credit. The buyer can obtain the benefits from a fully delayed payment if their order is sufficiently large. Similarly, the seller can sell many products while granting a credit period. Otherwise, the buyer receives only partial trade credit, and the seller can take the opportunity of both cash and credit payments. In this study, an economic order quantity (EOQ) inventory model for deteriorating products, under default risk control-based trade credit, is formulated using a discounted cash flow approach. The seller offers to the buyer order-linked trade credit with price-and credit-period-dependent demand. The optimal selling price, credit period policies, and replenishment cycle time are determined simultaneously, while maximizing the present value of the seller's total profit. Moreover, this research provides numerical examples and sensitivity analysis to illustrate the theoretical results, solution procedure, and gain managerial insights. <b>200</b> words.</p>

Vendor-Buyer Supply Chain Models With Supplier Default Risk Under Selling Price and Trade Credit Period Dependent Demand

2018 ◽  
pp. 156-173
Author(s):  
Chetansinh R. Vaghela ◽  
Nita H. Shah
Keyword(s):  
Supply Chain ◽  
Default Risk ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Model Parameters ◽  
Selling Price ◽  
Lot Size ◽  
Credit Period ◽  
Proposed Model ◽  
Dependent Demand

This chapter focuses on uncooperative supply chain inventory models when a supplier offers a credit period to the retailer for a fixed period of time. The models are studied with trade credit in Nash game and Supplier-Stackelberg game respectively. First, the authors have presented optimal results for centralized and decentralized decisions with selling price dependent demand and without trade credit. Second, the authors have obtained optimal results under the two games using classical optimization. The total joint profit of the supply chain is maximized with respect to initial lot size, selling price, and trade credit period. Numerical examples are provided to authenticate the proposed model and to provide some managerial insights. Also through sensitivity analysis, important model parameters are examined.

Optimal replenishment and credit policy in an inventory model for deteriorating items under two-levels of trade credit policy when demand depends on both time and credit period involving default risk

2018 ◽  
Vol 52 (4-5) ◽  
pp. 1175-1200 ◽  
Author(s):  
Avik Mukherjee ◽  
Gour Chandra Mahata
Keyword(s):  
Default Risk ◽  
Trade Credit ◽  
Optimal Solution ◽  
Deteriorating Items ◽  
Dynamic Decision Making ◽  
Credit Policy ◽  
Credit Period ◽  
Deterioration Rate ◽  
Demand Rate ◽  
Credit Financing

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.

A sustainable inventory system with the advanced payment policy and trade-credit strategy for a two-warehouse inventory system

Kybernetes ◽  
2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abu Hashan Md Mashud ◽  
Hui-Ming Wee ◽  
Biswajit Sarkar ◽  
Yu-Hua Chiang Li
Keyword(s):  
Trade Credit ◽  
Optimization Technique ◽  
Inventory Model ◽  
Inventory System ◽  
Selling Price ◽  
Content Type ◽  
Deterioration Rate ◽  
Trade Credits ◽  
Delay In Payments ◽  
Dependent Demand

Purpose This paper aims to consider a sustainable inventory model with price dependent demand, non-instantaneous deterioration rate, discount facility, partially backlogged shortages and advance and delay in payments for a two-warehouse system. Design/methodology/approach This model considered a non-instantaneous deterioration, which starts after a certain period with a constant rate. The deterioration rate in the rented warehouse is more compared to own warehouse. The proposed model focused on two things. The first one is to the benefits of the advance payments strategy and delayed payment for the retailer and supplier, where the two-warehouse system is available and the second one is using an appropriate discount facility on no of the installment to maximize the total profit. The classical optimization technique is used to solve the problem. Findings The combination of trade-credits and advance payments is initiated to provide more benefits to the retailer. The findings prove that advance payments, which are received from the retailer to the supplier are beneficial for the supplier, who can influence the demand increase because of higher lower selling prices. Decreasing the selling price is used as a catalyst to increase demand. It also extends the discount concept of Khan et al. (2019, 2019b). Research limitations/implications This model is limited by the fact that it does not consider variable deterioration. Therefore, the proposed inventory model could be extended by considering variable deterioration, as well as fully backlogged shortages and time-dependent demand function. Originality/value The study simultaneously considers a non-instantaneous deterioration inventory model, advance-payment, trade-credit for a sustainable two-warehouse inventory system. From the literature search to the best of knowledge no researcher has undergone this sort of study.

scholarly journals Inventory Modeling for Deteriorating Imperfect Quality Items with Selling Price Dependent Demand and Shortage Backordering under Credit Financing

2017 ◽  
Vol 2 (2) ◽  
pp. 110-124 ◽  
Author(s):  
Aditi Khanna ◽  
Prerna Gautam ◽  
Chandra K. Chandra K.
Keyword(s):  
Trade Credit ◽  
Optimal Order ◽  
Manufacturing Processes ◽  
Selling Price ◽  
Imperfect Quality ◽  
Inspection Process ◽  
Total Profit ◽  
Credit Financing ◽  
Fierce Competition ◽  
Dependent Demand

The production processes throughout the world aim at improving quality by introducing latest technologies so as to perform well in fierce competition. Despite this due to various unavoidable factors, most of the manufacturing processes end up with certain imperfections. Hence, all the items produced are not of perfect quality. The condition tends to be more susceptible while dealing with items of deteriorating quality; therefore an inspection process is must for screening good quality items from the ordered lot. Demand is assumed to be price dependent and it is represented by a constant price elasticity function. Also to endure with the rapid growth and turbulent markets, the suppliers try to engage and attract retailers through various gimmicks and one such contrivance is offering trade credit, which is proved to be an influential strategy for attracting new customers. In view of this, the present paper develops an inventory model for items of imperfect quality with deterioration under trade-credit policies with price dependent demand. Shortages are allowed and fully backlogged. A mathematical model is developed to depict this scenario. The aim of the study is to optimize the optimal order level, backorder level and selling price so as to maximize the retailer’s total profit. Findings are validated quantitatively by using numerical analysis. Sensitivity analysis is also performed so as to cater some important decision-making insights.

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