Inventory Model for Retailer-Supplier’s trade credit policy

Abstract

The concept of progressive trade credit optimises financial transactions among the supply chain (SC) partners and provides more control to utilise cash and credit flow. This trade credit effectively manages downstream financing activities such as account receivables and purchase discount schemes. This study attempts to obtain the retailer’s robust replenishment policy to optimise the maximum profit. In this work, a progressive trade credit is considered, which suggests that if the vendor settles the financial credit till Mduration, the vendor is not supposed to pay Interest, but if the seller decides the account subsequently M duration however before N (M<N), the seller (retailer)has to bear interest amount by the rate N(M<N). Further, suppose after N duration later account is clear, the seller will bear Interest at the rate 1c2 (1c2>1c1). This work tries to develop an optimal inventory policy by considering two scenarios T<N and T>=N. A sensitivity analysis was also conducted to evaluate the strength of the proposed model.