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Integrated inventory models considering the two-level trade credit policy and a price-negotiation scheme

  • Chen, Liang-Hsuan
  • Kang, Fu-Sen
Registered author(s):

    This paper develops the integrated inventory models with permissible delay in payment, in which customers' demand is sensitive to the buyer's price. The models consider the two-level trade credit policy in the vendor-buyer and buyer-customer relationships in supply chain management. A simple recursive solution procedure is proposed for the integrated models to determine the buyer's optimal pricing and production/order strategy. Although the total profit from the buyer and vendor increases together, the buyer's share lessens. To compensate the buyer's loss due to the cooperative relationship, a negotiation system is presented in order to allocate the profit increase to the vendor and buyer to determine the pricing and production/order strategy. A numerical example and sensitivity analysis are provided to illustrate the proposed model. The results indicate that the total profit from the buyer and vendor together can increase, although a price discount is given to the buyer in the proposed models.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0377-2217(09)00901-1
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    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 205 (2010)
    Issue (Month): 1 (August)
    Pages: 47-58

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    Handle: RePEc:eee:ejores:v:205:y:2010:i:1:p:47-58
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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    1. 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.
    2. Jaggi, Chandra K. & Goyal, S.K. & Goel, S.K., 2008. "Retailer's optimal replenishment decisions with credit-linked demand under permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 190(1), pages 130-135, October.
    3. Chen, Liang-Hsuan & Kang, Fu-Sen, 2010. "Coordination between vendor and buyer considering trade credit and items of imperfect quality," International Journal of Production Economics, Elsevier, vol. 123(1), pages 52-61, January.
    4. Ouyang, Liang-Yuh & Ho, Chia-Huei & Su, Chia-Hsien, 2008. "Optimal strategy for an integrated system with variable production rate when the freight rate and trade credit are both linked to the order quantity," International Journal of Production Economics, Elsevier, vol. 115(1), pages 151-162, September.
    5. Chang, Hung-Chi & Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2006. "Integrated vendor-buyer cooperative inventory models with controllable lead time and ordering cost reduction," European Journal of Operational Research, Elsevier, vol. 170(2), pages 481-495, April.
    6. Abad, P. L. & Jaggi, C. K., 2003. "A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive," International Journal of Production Economics, Elsevier, vol. 83(2), pages 115-122, February.
    7. Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2004. "Integrated vendor-buyer cooperative models with stochastic demand in controllable lead time," International Journal of Production Economics, Elsevier, vol. 92(3), pages 255-266, December.
    8. Chen, Liang-Hsuan & Kang, Fu-Sen, 2007. "Integrated vendor-buyer cooperative inventory models with variant permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 183(2), pages 658-673, December.
    9. Ho, Chia-Huei & Ouyang, Liang-Yuh & Su, Chia-Hsien, 2008. "Optimal pricing, shipment and payment policy for an integrated supplier-buyer inventory model with two-part trade credit," European Journal of Operational Research, Elsevier, vol. 187(2), pages 496-510, June.
    10. Yang, P. C., 2004. "Pricing strategy for deteriorating items using quantity discount when demand is price sensitive," European Journal of Operational Research, Elsevier, vol. 157(2), pages 389-397, September.
    11. Huang, Chao-Kuei & Tsai, Deng-Maw & Wu, Ji-Cheng & Chung, Kun-Jen, 2010. "An integrated vendor-buyer inventory model with order-processing cost reduction and permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 202(2), pages 473-478, April.
    12. Hsiao, Yu-Cheng, 2008. "Integrated logistic and inventory model for a two-stage supply chain controlled by the reorder and shipping points with sharing information," International Journal of Production Economics, Elsevier, vol. 115(1), pages 229-235, September.
    13. 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.
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