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Improving the supply chain's performance through trade credit under inventory-dependent demand and limited storage capacity

  • Zhong, Yuan-Guang
  • Zhou, Yong-Wu
Registered author(s):

    The present paper develops a performance-improving model through trade credit for a two-echelon supply chain, where a supplier sells a single product through a retailer who has limited storage space and faces an inventory-dependent end demand. We consider the non-integrated and integrated optimizing model. Under the non-integrated optimizing model, we present how the supplier determines the trade credit period to induce the retailer ordering more so as to reduce the supplier's operating cost and enhance sales volume of products as well. The proposed model shows that the presented trade credit policy can increase each member's profitability but also the profitability of the whole channel. Furthermore, we develop a theorem to efficiently determine the optimal inventory and trade credit policy for the integrated optimizing model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0925527312003209
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    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 143 (2013)
    Issue (Month): 2 ()
    Pages: 364-370

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    Handle: RePEc:eee:proeco:v:143:y:2013:i:2:p:364-370
    Contact details of provider: Web page: http://www.elsevier.com/locate/ijpe

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    1. Soni, Hardik & Shah, Nita H., 2008. "Optimal ordering policy for stock-dependent demand under progressive payment scheme," European Journal of Operational Research, Elsevier, vol. 184(1), pages 91-100, January.
    2. 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.
    3. Sheen, Gwo-Ji & Tsao, Yu-Chung, 2007. "Channel coordination, trade credit and quantity discounts for freight cost," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(2), pages 112-128, March.
    4. 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.
    5. Sana, Shib Sankar & Chaudhuri, K.S., 2008. "A deterministic EOQ model with delays in payments and price-discount offers," European Journal of Operational Research, Elsevier, vol. 184(2), pages 509-533, January.
    6. Zhou, Yong-Wu & Yang, Shan-Lin, 2005. "A two-warehouse inventory model for items with stock-level-dependent demand rate," International Journal of Production Economics, Elsevier, vol. 95(2), pages 215-228, February.
    7. Aaronson, Daniel & Bostic, Raphael W. & Huck, Paul & Townsend, Robert, 2004. "Supplier relationships and small business use of trade credit," Journal of Urban Economics, Elsevier, vol. 55(1), pages 46-67, January.
    8. Luo, Jianwen, 2007. "Buyer-vendor inventory coordination with credit period incentives," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 143-152, July.
    9. Charles W. Haley & Robert C. Higgins, 1973. "Inventory Policy and Trade Credit Financing," Management Science, INFORMS, vol. 20(4-Part-I), pages 464-471, December.
    10. Chung, Kun-Jen & Liao, Jui-Jung, 2009. "The optimal ordering policy of the EOQ model under trade credit depending on the ordering quantity from the DCF approach," European Journal of Operational Research, Elsevier, vol. 196(2), pages 563-568, July.
    11. Chen, Liang-Hsuan & Kang, Fu-Sen, 2010. "Integrated inventory models considering the two-level trade credit policy and a price-negotiation scheme," European Journal of Operational Research, Elsevier, vol. 205(1), pages 47-58, August.
    12. 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.
    13. 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.
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