The optimal pricing and ordering policy for an integrated inventory model when trade credit linked to order quantity

doi:10.1016/j.apm.2008.10.007

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Title:	The optimal pricing and ordering policy for an integrated inventory model when trade credit linked to order quantity
Authors:	Chang, Hung-Chi;Ho, Chia-Huei;Ouyang, Liang-Yuh;Su, Chia-Hsien
Contributors:	淡江大學經營決策學系
Keywords:	Integrated inventory model;Trade credit;Order-size-dependent delay;Pricing
Date:	2009-07
Issue Date:	2011-10-20 16:07:26 (UTC+8)
Publisher:	New York: Elsevier Inc.
Abstract:	In traditional inventory models, it is implicitly assumed that the buyer must pay for the purchased items as soon as they have been received. However, in many practical situations, the vendor is willing to provide the buyer with a permissible delay period when the buyer’s order quantity exceeds a given threshold. Therefore, to incorporate the concept of vendor–buyer integration and order-size-dependent trade credit, we present a stylized model to determine the optimal strategy for an integrated vendor–buyer inventory system under the condition of trade credit linked to the order quantity, where the demand rate is considered to be a decreasing function of the retail price. By analyzing the total channel profit function, we developed some useful results to characterize the optimal solution and provide an iterative algorithm to find the retail price, buyer’s order quantity, and the numbers of shipment per production run from the vendor to the buyer. Numerical examples and sensitivity analysis are given to illustrate the theoretical results, and some managerial insights are also obtained.
Relation:	Applied Mathematical Modelling 33(7), pp.2978-2991
DOI:	10.1016/j.apm.2008.10.007
Appears in Collections:	[Department of Management Sciences] Journal Article

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