Study On EOQ Model For Deteriorating Items Under Two-Level Trade Credit And Partial Trade Credit

Because of the rapid development of economy, the demand of products andservices is getting more personalized to people. It leads to corporate functionsconstantly being deliberated during this process, while the retail firm plays anincreasingly important business role with the sale as its main function. Delay inpayment which used to be an effectable method for sale often appears in thetrasaction between the retailer and the supplier. Meanwhile, with the developmentof market economy, customer market is becoming more competitive, and in order toretainting customers, the retailer also gives its customer a fixed period beforesettling the charge. Moreover, because of the existence of risks, especiallyreputation risk, the retailer frequently gives its customers a partial credit period inorder to avoid the risks.Under such background, by analyzing and concluding the research results athome and abroad about delay in payment, this paper studies the retailer’s optimalinventory policy as to deteriorating products. And then it considers the variedfactors and their impacts to retailer’s optical inventory policy during the studyingprocess. The main purpose of this paper is to investigate the retailer’s inventorypolicy for deteriorating items under two different conditions, that is, two-leveltrade credit and partial trade credit. It is assumed that the retailer has the powerfuldecision-making right in the whole supply chain, i.e., the retailer can obtain the fulltrade credit offered by the supplier and the retailer also offers trade credit to itscustomer. When finding retailer’s inventory policy under the first condition, theretailer will give its customer the full trade credit. However, under the secondcondition, the retailer will just give its customers a partial trade credit in order toavoid the reputational risk of market. First an EOQ model is made to maximize theretailer’s profit when researching these two problems. And then by analyzing andsolving the model, the retailer’s optimal inventory policy is determined. Moreover,previously published results of other researchers are reduced as special cases of thispaper. Finally, numerical examples are given to validate the theorems and a lot ofmanagerial practices are obtained.