Optimal ordering policy for a two-warehouse inventory model use of two-level trade credit

Abstract

In today's competitive markets, the supplier let the buyer to pay the purchasing cost after receiving the items, this strategy motivates the retailer to buy more items from the supplier and gains some benefit from the money which they did not pay at the time of receiving of the items. However, the retailer will be unable to pay offthe debt obligations to the supplier in the future, so this study extends Yen et al. (2012) to consider the above situation and assumes the retailer can either pay offall accounts at the end of the delay period or delay incurring interest charges on the unpaid and overdue balance due to the difference between interest earned and interest charged. We will discuss the explorations of the function behaviors of the objection function to demonstrate the retailer's optimal replenishment cycle time not only exists but also is unique. Finally, numerical examples are given to illustrate the theorems and gained managerial insights.