An Optimal Ordering Policy of the Retailers Under Partial Trade Credit Financing and Restricted Cycle Time in Supply Chain

Abstract

The traditional EOQ (Economic Order Quantity) model assumes that retailers’ capitals are unrestricting and the retailer must pay for items as soon as the retailer receives them from suppliers. However, this may not be true. In practice, the supplier will offer the retailer a delay period. This period is known as the trade credit period. Previously published papers assumed that the supplier would offer the retailer a delay period and the retailer could sell goods and earn interest or investment within the trade credit period. They assumed that the supplier would offer the retailer a delay period but the retailer would not offer the trade credit period to his/her customer. We extend their model and construct new ordering policy. In this paper, the retailer will also adopt the partial trade credit policy to his/her customer. We assume that the retailer’s trade credit period offered by the supplier is not shorter than his/her customer’s trade credit period offered by the retailer. In addition, they assumed the relationship between the supplier and the retailer is one-to-one. One thing we want to emphasize here is that the supplier has cooperative relations with many retailers. Furthermore, we assume that the total of the cycle time is restricted. Under these conditions, we model the retailers’ inventory system to determine the optimal cycle times for n retailers.