Improving the supply chain's performance through trade credit under inventory-dependent demand and limited storage capacity
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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Working Paper Series
WP-00-28, Federal Reserve Bank of Chicago.
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