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Economic order quantity model with trade credit financing for non-decreasing demand

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  • Teng, Jinn-Tsair
  • Min, Jie
  • Pan, Qinhua
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    Abstract

    Researchers in the past have established their inventory lot-size models under trade credit financing by assuming that the demand rate is constant. However, from a product life cycle perspective, it is only in the maturity stage that demand is near constant. During the growth stage of a product life cycle (especially for high-tech products), the demand function increases with time. To obtain robust and generalized results, we extend the constant demand to a linear non-decreasing demand function of time. As a result, the fundamental theoretical results obtained here are suitable for both the growth and maturity stages of a product life cycle. In addition, we characterize the optimal solutions and obtain conclusions on important and relevant managerial phenomena. Lastly, we provide several numerical examples to illustrate the proposed model and its optimal solution.

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    Bibliographic Info

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 40 (2012)
    Issue (Month): 3 ()
    Pages: 328-335

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    Handle: RePEc:eee:jomega:v:40:y:2012:i:3:p:328-335

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    Related research

    Keywords: Inventory; Trade credit; Increasing demand; Finance;

    References

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    1. Skouri, K. & Konstantaras, I. & Papachristos, S. & Ganas, I., 2009. "Inventory models with ramp type demand rate, partial backlogging and Weibull deterioration rate," European Journal of Operational Research, Elsevier, vol. 192(1), pages 79-92, January.
    2. Chang, Hung-Chi & Ho, Chia-Huei, 2010. "Exact closed-form solutions for "optimal inventory model for items with imperfect quality and shortage backordering"," Omega, Elsevier, vol. 38(3-4), pages 233-237, June.
    3. Teng, Jinn-Tsair & Chang, Chun-Tao, 2009. "Optimal manufacturer's replenishment policies in the EPQ model under two levels of trade credit policy," European Journal of Operational Research, Elsevier, vol. 195(2), pages 358-363, June.
    4. Huang, Yung-Fu, 2007. "Economic order quantity under conditionally permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 176(2), pages 911-924, January.
    5. Huang, Yung-Fu & Hsu, Kuang-Hua, 2008. "An EOQ model under retailer partial trade credit policy in supply chain," International Journal of Production Economics, Elsevier, vol. 112(2), pages 655-664, April.
    6. Chung, Kun-Jen, 2008. "Comments on the EOQ model under retailer partial trade credit policy in the supply chain," International Journal of Production Economics, Elsevier, vol. 114(1), pages 308-312, July.
    7. Teng, Jinn-Tsair & Chang, Chun-Tao & Goyal, Suresh Kumar, 2005. "Optimal pricing and ordering policy under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 97(2), pages 121-129, August.
    8. Dye, Chung-Yuan, 2007. "Joint pricing and ordering policy for a deteriorating inventory with partial backlogging," Omega, Elsevier, vol. 35(2), pages 184-189, April.
    9. Goyal, Suresh Kumar & Teng, Jinn-Tsair & Chang, Chun-Tao, 2007. "Optimal ordering policies when the supplier provides a progressive interest scheme," European Journal of Operational Research, Elsevier, vol. 179(2), pages 404-413, June.
    10. Chun-Tao Chang & Jinn-Tsair Teng, 2004. "Retailer’s optimal ordering policy under supplier credits," Computational Statistics, Springer, vol. 60(3), pages 471-483, December.
    11. Wee, Hui-Ming & Wang, Wan-Tsu, 2012. "A supplement to the EPQ with partial backordering and phase-dependent backordering rate," Omega, Elsevier, vol. 40(3), pages 264-266.
    12. Liao, Hung-Chang & Tsai, Chih-Hung & Su, Chao-Ton, 2000. "An inventory model with deteriorating items under inflation when a delay in payment is permissible," International Journal of Production Economics, Elsevier, vol. 63(2), pages 207-214, January.
    13. Pentico, David W. & Drake, Matthew J. & Toews, Carl, 2011. "The EPQ with partial backordering and phase-dependent backordering rate," Omega, Elsevier, vol. 39(5), pages 574-577, October.
    14. Hsieh, Tsu-Pang & Dye, Chung-Yuan, 2012. "A note on "The EPQ with partial backordering and phase-dependent backordering rate"," Omega, Elsevier, vol. 40(1), pages 131-133, January.
    15. Wee, H.M. & Yu, Jonas & Chen, M.C., 2007. "Optimal inventory model for items with imperfect quality and shortage backordering," Omega, Elsevier, vol. 35(1), pages 7-11, February.
    16. Chung, Kun-Jen & Huang, Yung-Fu, 2003. "The optimal cycle time for EPQ inventory model under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 84(3), pages 307-318, June.
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    Citations

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    Cited by:
    1. Wu, Jiang & Ouyang, Liang-Yuh & Cárdenas-Barrón, Leopoldo Eduardo & Goyal, Suresh Kumar, 2014. "Optimal credit period and lot size for deteriorating items with expiration dates under two-level trade credit financing," European Journal of Operational Research, Elsevier, vol. 237(3), pages 898-908.
    2. Chung, Kun-Jen, 2013. "A note on the article “Economic order quantity with trade credit financing for non-decreasing demand”," Omega, Elsevier, vol. 41(2), pages 441-441.
    3. Wang, Wan-Chih & Teng, Jinn-Tsair & Lou, Kuo-Ren, 2014. "Seller’s optimal credit period and cycle time in a supply chain for deteriorating items with maximum lifetime," European Journal of Operational Research, Elsevier, vol. 232(2), pages 315-321.
    4. Taleizadeh, Ata Allah & Pentico, David W. & Saeed Jabalameli, Mohammad & Aryanezhad, Mirbahador, 2013. "An EOQ model with partial delayed payment and partial backordering," Omega, Elsevier, vol. 41(2), pages 354-368.
    5. Zhang, Qinhong & Dong, Ming & Luo, Jianwen & Segerstedt, Anders, 2014. "Supply chain coordination with trade credit and quantity discount incorporating default risk," International Journal of Production Economics, Elsevier, vol. 153(C), pages 352-360.
    6. Chern, Maw-Sheng & Pan, Qinhua & Teng, Jinn-Tsair & Chan, Ya-Lan & Chen, Sheng-Chih, 2013. "Stackelberg solution in a vendor–buyer supply chain model with permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 144(1), pages 397-404.

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