In practice, to attract new buyers and increase sales, a supplier frequently offers its retailers a credit period to settle the amount owed to him/her. There is no interest charge to a buyer if the purchasing amount is paid within the credit period, and vice versa. a retailer in turn
offers another trade credit period N to its customers.
The benefits of trade credit are not only to attract new buyers who consider it a type of price reduction, but also to provide a competitive strategy other than introduce permanent price reductions. On the other hand, the policy of granting credit terms adds an additional cost to the
seller as well as an additional dimension of default risk. In this paper, we first incorporate the fact that trade credit has a positive impact on demand but negative impacts on costs and default risks to establish an EOQ model for the seller in a supply chain with up-stream and
down-stream trade credits. Then we derive the necessary and sufficient conditions to obtain the optimal replenishment time and credit period for the seller. Finally, we use some numerical examples to illustrate the theoretical results.
Proceedings of the 2013 International Conference in Management Sciences and Decision Making=2013年管理科學與經營決策國際學術研討會論文集