Optimal policy for supply chain management system with retailer's hybrid
payment strategy and supplier's price discount facility
Abstract
Suppliers often offer item-wise price discounts and trade credit to
their retailers after receiving an initial payment for the supplied
product. This discount is proportional to the total payment done already
against the total cost accrued by the retailer. The supplier may also
decide to allow the retailer to prepay a random part of the purchasing
cost at any random time within the duration that an advance payment is
allowed. In order to encourage the customers to increase their orders,
the retailer, in turn, offers a trade-credit for a partial amount of the
sale price to the customers. In this paper, we focus on the optimal
replenishment policies of a retailer that could maximize the retailer’s
average profit when he/she is confronted with the supplier’s trade
offers of credit and price-discount under a two-layer supply chain
management in a stochastic environment. We have obtained some
theoretical results from the optimum cycle time and optimum order
quantity of the proposed model and numerically analysed with a suitable
example to demonstrate the real-life applicability of the model.
Finally, sensitivity analyses are made on the significant parameters in
order to gain some managerial insights.