Manufacturer–retailer supply chain model with payment time-dependent discount factor under two-level trade credit

Abstract

It is usually observed in the marketplace that, for longer delayed payment, both the sales volume and the loss of interest in terms of opportunity cost turn up higher. On the other hand, for longer advanced payment, the sales volume appears lower but the earned interest appears higher. To balance between delayed and advanced payments, a discount factor that changes the wholesale price for different payment-term scenarios comes into play. In this paper, a single-manufacturer and a single-retailer supply chain model is developed where the manufacturer adopts a lot-for-lot policy for delivering the retailer's order quantity. The retailer offers a flexible payment time to customers. The market demand is assumed to be linearly dependent on the selling price. The discount factor which makes the difference between the two wholesale prices is taken as a function of payment time. The impact of advanced and delayed payments on the optimal payment time is discussed and analysed in a retailer-Stackelberg game structure. A numerical example is taken to exhibit the optimal results and perform sensitivity analysis.

Keywords:

• Supply chain
• price-dependent demand
• advanced payment
• delayed payment

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No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

R. Bhattacharjee

R. Bhattacharjee is an Assistant Professor in the Department of Mathematics at the JIS College of Engineering, Kalyani, India. He did his MS and Ph. D. in Mathematics from Jadavpur University, Kolkata, India. His research topics are inventory control and supply chain management. He has research papers published in International Journal of Services and Operations Management, International Journal of Logistics Systems and Management and accepted in International Journal of Inventory Research.

T. Maiti

T. Maiti is an Assistant Professor in the Department of Mathematics, Gurudas College, Kolkata, India. He did his MS and Ph. D in Mathematics from Jadavpur University, India. His area of interest is inventory control/supply chain management/reverse logistics. He has research papers published in Journal of the Operational Research Society, International Journal of Systems Science, Journal of Systems Science and Systems Engineering, Optimization Letters, Journal of manufacturing Systems, The International Journal of Advanced Manufacturing Technology, International Journal of Production Economics, Applied Mathematical Modelling, Computer and Industrial Engineering and other journals. He was a NBHM Post Doctoral Fellow at Jadavpur University, Kolkata during the period 2014–2017.

B. C. Giri

B. C. Giri is a Professor in the Department of Mathematics, Jadavpur University, India. He did his MS in Mathematics and Ph. D in Operations Research both from Jadavpur University, India. His research interests include inventory/supply chain management, production planning and scheduling, reliability and maintenance, and his research papers have appeared in Naval Research Logistics, International Journal of Production Research, Omega, Journal of the Operational Research Society, European Journal of Operational Research, International Journal of Production Economics and other journals. He was a JSPS Research Fellow at Hiroshima University, Japan during the period 2002–2004, Humboldt Research Fellow at Mannheim University, Germany during the period 2007–2008 and a Fulbright Senior Research Fellow at Louisiana State University, USA in the year 2012.