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

Author

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

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.

Suggested Citation

  • Teng, Jinn-Tsair & Min, Jie & Pan, Qinhua, 2012. "Economic order quantity model with trade credit financing for non-decreasing demand," Omega, Elsevier, vol. 40(3), pages 328-335.
  • Handle: RePEc:eee:jomega:v:40:y:2012:i:3:p:328-335
    DOI: 10.1016/j.omega.2011.08.001
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    References listed on IDEAS

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    Cited by:

    1. Yang, Honglin & Zhuo, Wenyan & Shao, Lusheng, 2017. "Equilibrium evolution in a two-echelon supply chain with financially constrained retailers: The impact of equity financing," International Journal of Production Economics, Elsevier, vol. 185(C), pages 139-149.
    2. 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.
    3. Wu, Jiang & Al-khateeb, Faisal B. & Teng, Jinn-Tsair & Cárdenas-Barrón, Leopoldo Eduardo, 2016. "Inventory models for deteriorating items with maximum lifetime under downstream partial trade credits to credit-risk customers by discounted cash-flow analysis," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 105-115.
    4. 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.
    5. 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.
    6. 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.
    7. Yu-Chung Tsao & Vu Thuy Linh, 2016. "Supply Chain Network Designs Developed for Deteriorating Items Under Conditions of Trade Credit and Partial Backordering," Networks and Spatial Economics, Springer, vol. 16(3), pages 933-956, September.
    8. Chen, Sheng-Chih & Teng, Jinn-Tsair, 2015. "Inventory and credit decisions for time-varying deteriorating items with up-stream and down-stream trade credit financing by discounted cash flow analysis," European Journal of Operational Research, Elsevier, vol. 243(2), pages 566-575.
    9. repec:spr:annopr:v:238:y:2016:i:1:d:10.1007_s10479-015-2100-5 is not listed on IDEAS
    10. Gao, Deng & Zhao, Xiaobo & Geng, Wei, 2014. "A delay-in-payment contract for Pareto improvement of a supply chain with stochastic demand," Omega, Elsevier, vol. 49(C), pages 60-68.
    11. Wu, Jiang & Skouri, Konstantina & Teng, Jinn-Tsair & Ouyang, Liang-Yuh, 2014. "A note on “optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment”," International Journal of Production Economics, Elsevier, vol. 155(C), pages 324-329.
    12. 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.
    13. Wu, Jiang & Chan, Ya-Lan, 2014. "Lot-sizing policies for deteriorating items with expiration dates and partial trade credit to credit-risk customers," International Journal of Production Economics, Elsevier, vol. 155(C), pages 292-301.
    14. Wu, Kan & Yuan, Xue-Ming, 2016. "Optimal production-inventory policy for an integrated multi-stage supply chain with time-varying demandAuthor-Name: Zhao, Shi Tao," European Journal of Operational Research, Elsevier, vol. 255(2), pages 364-379.
    15. 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.
    16. Chen, Sheng-Chih & Teng, Jinn-Tsair & Skouri, Konstantina, 2014. "Economic production quantity models for deteriorating items with up-stream full trade credit and down-stream partial trade credit," International Journal of Production Economics, Elsevier, vol. 155(C), pages 302-309.
    17. 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.
    18. Gour Chandra Mahata & Sujit Kumar De, 2016. "An EOQ inventory system of ameliorating items for price dependent demand rate under retailer partial trade credit policy," OPSEARCH, Springer;Operational Research Society of India, vol. 53(4), pages 889-916, December.
    19. Tiwari, Sunil & Cárdenas-Barrón, Leopoldo Eduardo & Khanna, Aditi & Jaggi, Chandra K., 2016. "Impact of trade credit and inflation on retailer's ordering policies for non-instantaneous deteriorating items in a two-warehouse environment," International Journal of Production Economics, Elsevier, vol. 176(C), pages 154-169.
    20. Feng, Lin & Chan, Ya-Lan & Cárdenas-Barrón, Leopoldo Eduardo, 2017. "Pricing and lot-sizing polices for perishable goods when the demand depends on selling price, displayed stocks, and expiration date," International Journal of Production Economics, Elsevier, vol. 185(C), pages 11-20.

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    Keywords

    Inventory; Trade credit; Increasing demand; Finance;

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