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An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space

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  • Zhou, Yong-Wu
  • Zhong, Yuanguang
  • Li, Jicai

Abstract

This paper considers a two-echelon supply chain where a supplier sells a single product through a retailer, who faces an inventory-dependent demand. The supplier hopes to incentive the retailer to order more items by offering trade credit. The retailer places the ordered items on the display shelf (DS) with limited space and stocks the remaining items (if any) that exceed the shelf capacity in his/her backroom/warehouse (BW). From the supplier’s perspective, we focus mainly on under which conditions the supplier should offer trade credit and how he/she should design such trade credit policy and corresponding ordering policy to obtain much more benefits. From the retailer’s perspective, we discuss whether the retailer needs BW and exactly how many items need to be stocked in BW when the supplier offers trade credit. We formulate a “supplier-Stackelberg” game model, from which we obtain the conditions under which the presented simple trade credit policy not only increases the overall chain profit but also each member’s profit. We also show that the trade credit policy is always more beneficial to the retailer than to the supplier if it is offered.

Suggested Citation

  • Zhou, Yong-Wu & Zhong, Yuanguang & Li, Jicai, 2012. "An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space," European Journal of Operational Research, Elsevier, vol. 223(1), pages 76-85.
  • Handle: RePEc:eee:ejores:v:223:y:2012:i:1:p:76-85
    DOI: 10.1016/j.ejor.2012.06.012
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    2. Zhong, Yuan-Guang & Zhou, Yong-Wu, 2013. "Improving the supply chain's performance through trade credit under inventory-dependent demand and limited storage capacity," International Journal of Production Economics, Elsevier, vol. 143(2), pages 364-370.
    3. Chen, Jiguang & Hu, Qiying, 2015. "Optimal payment scheme when the supplier’s quality level and cost are unknown," European Journal of Operational Research, Elsevier, vol. 245(3), pages 731-742.
    4. Kuo, Chia-Wei & Yang, Shu-Jung Sunny, 2013. "The role of store brand positioning for appropriating supply chain profit under shelf space allocation," European Journal of Operational Research, Elsevier, vol. 231(1), pages 88-97.
    5. 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.
    6. Teng, Jinn-Tsair & Lou, Kuo-Ren & Wang, Lu, 2014. "Optimal trade credit and lot size policies in economic production quantity models with learning curve production costs," International Journal of Production Economics, Elsevier, vol. 155(C), pages 318-323.

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