Retailer's inventory policy under supplier's partial trade credit policy

Abstract

This paper discusses the economic order quantity (EOQ) under partial trade credit. In 1985, Goyal assume that: (i) The unit selling price and the unit purchasing price were equal. (ii) The supplier would offer the retailer full trade credit under condition of delay payments. The main purpose of this paper wants to modify Goyal's model to presume that the unit selling price and the unit purchasing price are not necessarily equal. Furthermore, in this paper, we assume that the supplier would offer the retailer partial trade credit not full trade credit. That is, the retailer must make a partial payment to the supplier when the order is received. Then, the retailer must pay off the remaining balance at the end of the permissible delay period. Under these conditions, we model the retailer's inventory system as a cost minimization problem to determine the retailer's optimal inventory cycle time and optimal order quantity. One theorem is developed to efficiently determine the optimal inventory policy for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorem obtained in this paper.