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Retailer’s replenishment and credit policies for deteriorating inventory under credit period-dependent demand and bad-debt loss

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  • Nita Shah

Abstract

The business world survives on trade credit financing. The three players, viz. supplier, retailer, and customer, are building blocks of any business firm. The retailer receives credit period from the supplier to settle the accounts due against the purchases. For retailer, the customer is a prominent stakeholder. To withstand the competitive market and generate credit sales and cash sales, the retailer offers credit period to attract more customers. This will boost the demand for the retailer and consequently the supplier. The offer of credit period by the result may result in bad-debt loss when the customer declares incapability to do the payment. The situation worsens when the items in the inventory system are subject to deterioration. In this article, a mathematical model is formulated to determine the optimal replenishment time and credit period under two levels of trade credit financing when the demand and bad-debt loss depend on the length of the credit period. The profit per unit time of the retailer is maximized by optimizing the cycle time and date-terms credit period when items in the inventory deteriorate at a constant rate. A numerical example is given to validate the proposed model. Sensitivity analysis is carried out and observations are deduced. Copyright Sociedad de Estadística e Investigación Operativa 2015

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  • Nita Shah, 2015. "Retailer’s replenishment and credit policies for deteriorating inventory under credit period-dependent demand and bad-debt loss," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 23(1), pages 298-312, April.
    • Handle: RePEc:spr:topjnl:v:23:y:2015:i:1:p:298-312
    DOI: 10.1007/s11750-014-0343-y
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    References listed on IDEAS

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    1. Aditi Khanna & Aakanksha Kishore & Biswajit Sarkar & Chandra K. Jaggi, 2018. "Supply Chain with Customer-Based Two-Level Credit Policies under an Imperfect Quality Environment," Mathematics, MDPI, vol. 6(12), pages 1-35, December.
    2. Ata Allah Taleizadeh & Nadia Pourmohammad-Zia & Ioannis Konstantaras, 2021. "Partial linked-to-order delayed payment and life time effects on decaying items ordering," Operational Research, Springer, vol. 21(3), pages 2077-2099, September.
    3. Umakanta Mishra & Leopoldo Eduardo Cárdenas-Barrón & Sunil Tiwari & Ali Akbar Shaikh & Gerardo Treviño-Garza, 2017. "An inventory model under price and stock dependent demand for controllable deterioration rate with shortages and preservation technology investment," Annals of Operations Research, Springer, vol. 254(1), pages 165-190, July.

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