Retailer's optimal ordering decision with trade credit financing

Abstract

As competition becomes more intensive and the capital issue attracting more attention in the operation, trade credit has become important to achieve competition advantage. The trade credit issue, the discount on price of items, the present level of holding capital and some other key factors on business decision are firstly specialized on in this paper, and then, on the basis of the classical EOQ model, a simple useful mathematic mode is established with the retailer's capital consideration. The retailer's optimal ordering quantity can be characterized by three situations. At last, the influence of the payment delay, as well as the present capital on hand, on the final decision is discussed by analyzing the several solutions.