The retailers optimal decision on order quantity and credit periods under two-level trade credit policy
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 retailers 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 retailers 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.
two-level trade credit policy inventory quantity discounts delay in payments