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Supply chain network design under advance-cash-credit payment

Author

Listed:
  • Yu-Chung Tsao

    (National Taiwan University of Science and Technology
    Asia University
    China Medical University Hospital, China Medical University)

  • Aisyah Dewi Muthi’ah

    (National Taiwan University of Science and Technology
    Institut Teknologi Sepuluh Nopember)

  • Thuy-Linh Vu

    (National Taiwan University of Science and Technology)

  • Niniet Indah Arvitrida

    (Institut Teknologi Sepuluh Nopember)

Abstract

In practice, a vendor may offer a retailer an advance-cash-credit (ACC) payment scheme. This implies the buyer needs to pay a fraction of the purchasing cost before he receives the item (advance payment), some cash when the item is arrived (cash on delivery), and then the remaining purchasing cost after a credit period (credit payment). This paper studies the effect of payment schemes on the supply chain network design. The network consists of an outside supplier, multiple distribution centers (DCs), and multiple retailers. The DCs receive an upstream ACC payment from the supplier. This study attempts to determine the optimal location, allocation, as well as the inventory cycle time while minimizing total cost. A continuous approximation is used in the model development and the time value of money concept is considered, since different payment schemes related to time change the cash value. Numerical studies are adopted to demonstrate the solution approach and the effects of changing parameters on decisions and total cost. This study provides novel management implications for supply chain network designers’ reference. The results show that the number of DCs to be opened, the joint replenishment cycle time of DC, and the total cost increase as the interest earned decreases and the interest charged increases.

Suggested Citation

  • Yu-Chung Tsao & Aisyah Dewi Muthi’ah & Thuy-Linh Vu & Niniet Indah Arvitrida, 2021. "Supply chain network design under advance-cash-credit payment," Annals of Operations Research, Springer, vol. 305(1), pages 251-272, October.
    • Handle: RePEc:spr:annopr:v:305:y:2021:i:1:d:10.1007_s10479-021-04221-x
    DOI: 10.1007/s10479-021-04221-x
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    References listed on IDEAS

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    1. Jahani, Hamed & Abbasi, Babak & Sheu, Jiuh-Biing & Klibi, Walid, 2024. "Supply chain network design with financial considerations: A comprehensive review," European Journal of Operational Research, Elsevier, vol. 312(3), pages 799-839.

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