Research On The Deferred Payment Policy And Optimal Payment Time Under Different Credit Period

With the rapid economic development, market competition is becomingincreasingly fierce. In order to attract customers, stimulate demand, and increasedmarket share, diverse promotion methods and transaction mode are adopted by suppliers.Delay in payment as a covert way discount is a kind of important sales coordinationmeans in the actual business transactions, and it is usually used by suppliers to attractretailers increase order quantity. As for suppliers, in order to reduce the loss of bad andspeed up the capital backflow, how to design scientific and reasonable deferred paymentof the strategy is very urgent. As for retailers, how to maximum the use of delay inpayment policy to determine the optimum order and payment strategy is particularlyimportant under the condition of minimization cost (maximization profit).The paper assumes that suppliers providing different credit and cash discountpolicy, from the perspective of supplier and retailers to discuss the following questions:①A cost model about retailers is generated for demand decreasing product underfixed credit period, and the policy of deferred payment and cash discount are usuallytaken by suppliers, and the criterion of determining the optimal payment time aboutretailers is proposed. The example and main parameter’s sensitivity analysis show thatthe initial demand and demand factor have significant influence on ordering policy andtotal inventory cost, the cash discount rate and credit period have great influence onpayment time.②An expression of segmented credit period is constructed when the credit periodis not fixed, and the criterion of determining the optimal payment time is proposed byretailers’ cost model. Calculation results shows that order quantity and order thresholdhave significant influence on deferred payment period and optimal payment time, thecash discount rate has greater influence on retailers’ average cost and optimal paymenttime than that of cash discount period.③It was assumed that deferred payment period is a continuous function of orderquantity on the basis of segmented credit period. The explicit expression of Credit andoptimal deferred payment policy were obtained by maximizing the system profit, andthe criterion of determining the optimal payment time is proposed by retailers’ profitmodel. Calculation results shows that order quantity, order threshold, and interest ratehave significant influence on optimal deferred payment period and payment time, the cash discount rate has greater influence on retailers’ average profit and optimal paymenttime than that of cash discount period.