An inventory model with stochastic demand under conditionally permissible delay in payments

Abstract

Researchers in the past have established the newsvendor model with rarely considering trade credit. In practices, the supplier usually provides the retailer a permissible delay in payments to stimulate more order quantity. As a result, we try to establish an inventory model for stochastic demand, in which the supplier provides trade credit to the retailer if the order quantity is greater than or equal to a predetermined quantity. The residual or shortage at the end of the cycle is dealt as the newsvendor problem. Two useful theorems to determine the optimal order quantity are derived. Several numerical examples are provided to illustrate the results. The sensitivity analysis on main parameters is presented.

Ordering Policies of a Deteriorating Item in an EOQ Model under Upstream Partial Order-Quantity-Dependent Trade Credit and Downstream Full Trade Credit

“…Pourmohammad Zia and Taleizadeh [9] established an EOQ inventory model with shortage under order-sizedependent advance and credit payments to optimize the ordering policy. Under order-quantity-dependent trade credit, Yueli et al [10] assumed the newsvendor model with stochastic demand and shortage and concluded that higher delay periods would increase the profit. When a three-echelon supply chain is assumed, Yang et al [11] obtained the maximum joint profit of a two-level trade credit for a single product with defective production and repair rate.…”