Determination of Retailer’s Optimal Policy in a Price-Sensitive Inventory Model Faciliating Two Types of Payment Scheme for the Customers

Abstract

This article investigates the effect of implementation of two types of payment scheme to the customer by a retailer in an inventory system. Our study is to determine optimal cycle time and selling price of a commodity when two types of payment scheme namely immediate payment scheme as well as trade credit policy are available to the customer. In reality, two trends of payment scheme are available in business world. Some people want to pay immediately after purchase while some favors some time delay in payment. From retailer’s point of view, in many situations, retailer faces scarcity of capital to start his business. Now- a- day bank loan is available to the retailer at ease. We formulate a mathematical model keeping in mind all these things. Two tier credit policies have been considered. First of all, bank offers a delay period to repay loan. Secondly, retailer also offers a credit period to customer. Different cases possible owing to variable duration of credit periods. Our ultimate goal is to optimize retailer’s profit for different cases arisen in the model. A numerical example has been posed and discussed in support of the model.