Skip to main content
SpringerLink
Log in

Trade credit competition between two retailers in a supply chain under credit-linked retail price and market demand

  • Original Paper
  • Published:
Optimization Letters Aims and scope Submit manuscript

Abstract

The paper considers a supply chain system in which the sole manufacturer supplies the same product to two retailers who compete in offering trade credit period to customers. Both the market demand and retail prices vary with the trade credit periods offered by the retailers. The manufacturer also provides a trade credit period to both the retailers to settle down their accounts. The net profit function of the supply chain is derived considering possible relationships among the trade credit periods offered by the manufacturer and the retailers and the time when each retailer receives the last payment from his customer. An algorithm is developed to find the optimal solution of the proposed model. From the numerical study, it is observed that a two-level trade credit financing can increase profits not only for the manufacturer and the retailers but also for the whole supply chain.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7

Similar content being viewed by others

References

  1. Abad, P.L., Jaggi, C.K.: A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive. Int. J. Prod. Econ. 83, 115–122 (2003)

    Article  Google Scholar 

  2. Bernstein, F., Federgruen, A.: Dynamic inventory and pricing models for competing retailers. Navel Res. Logist. 51(2), 258–274 (2004)

    Article  MathSciNet  MATH  Google Scholar 

  3. Cachon, G.P.: Stock wars: inventory competition in a two-echelon supply chain with multiple retailers. Oper. Res. 49, 658–674 (2001)

    Article  MathSciNet  MATH  Google Scholar 

  4. Chen, L.H., Kang, F.S.: Integrated inventory models considering the two-level trade credit policy and a price-negotiation scheme. Eur. J. Oper. Res. 205, 47–58 (2010a)

    Article  MATH  Google Scholar 

  5. Chen, L.H., Kang, F.S.: Coordination between vendor and buyer considering trade credit and items of imperfect quality. Int. J. Prod. Econ. 123(1), 52–61 (2010b)

    Article  MathSciNet  Google Scholar 

  6. Chen, L.H., Kang, F.S.: Integrated vendor-buyer cooperative models with variant permissible delay in payments. Eur. J. Oper. Res. 183(2), 658–673 (2007)

    Article  MATH  Google Scholar 

  7. Choi, S.: Price competition in a duopoly common retailer channel. J. Retail. 72(2), 117–134 (1996)

    Article  Google Scholar 

  8. Dai, Y., Chao, X., Fang, S.C., Nuttle, H.L.W.: Pricing in revenue management for multiple firms competing for customers. Int. J. Prod. Econ. 98, 1–16 (2005)

    Article  Google Scholar 

  9. Dave, U.: Letters and viewpoints on economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 46, 1069–1070 (1985)

    Article  Google Scholar 

  10. Dumrongsiri, A., Fan, M., Jain, A., Moinzadeh, K.: A supply chain model with direct and retail channels. Eur. J. Oper. Res. 187(3), 691–718 (2008)

    Article  MathSciNet  MATH  Google Scholar 

  11. Gilbert, S.M., Cvsa, V.: Strategic commitment to price to stimulate downstream innovation in a supply chain. Eur. J. Oper. Res. 150, 617–639 (2003)

    Article  MATH  Google Scholar 

  12. Giri, B.C., Maiti, T.: Supply chain model with price- and trade credit-sensitive demand under two-level permissible delay in payments. Int. J. Syst. Sci. 44(5), 937–948 (2013)

    Article  MathSciNet  MATH  Google Scholar 

  13. Goyal, S.K.: Economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 36, 335–338 (1985)

    Article  MATH  Google Scholar 

  14. Goyal, S.K., Teng, J.T., Chang, C.T.: Optimal ordering policies when the supplier provides a progressive interest-payable scheme. Eur. J. Oper. Res. 179, 404–413 (2007)

    Article  MATH  Google Scholar 

  15. Ho, C.H., Ouyang, L.Y., Su, C.H.: Optimal pricing, shipment and payment policy for an integrated supplier-buyer inventory model with two-part trade credit. Eur. J. Oper. Res. 187, 496–510 (2008)

    Article  MathSciNet  MATH  Google Scholar 

  16. Ho, C.H.: The optimal integrated inventory policy with price-and-credit-linked demand under two-level trade credit. Comput. Ind. Eng. 60, 117–126 (2011)

    Article  Google Scholar 

  17. Huang, Y.F.: Optimal retailer’s ordering policies in the EOQ model under trade credit financing. J. Oper. Res. Soc. 54, 1011–1015 (2003)

    Google Scholar 

  18. Huang, Y.F.: An inventory model under two levels of trade credit and limited storage space derived without derivatives. Appl. Math. Model. 30, 418–436 (2006)

    Article  MATH  Google Scholar 

  19. Huang, Y.F.: Optimal retailer’s replenishment decisions in the EPQ model under two levels of trade credit policy. Eur. J. Oper. Res. 176, 1577–1591 (2007)

    Article  MATH  Google Scholar 

  20. Huang, Y.F., Hsu, K.H.: An EOQ model under retailer partial trade credit policy in supply chain. Int. J. Prod. Econ. 112, 655–664 (2008)

    Article  Google Scholar 

  21. Huang, C.K., Tsai, D.M., Wu, J.C., Chung, K.J.: An integrated vendor-buyer inventory model with order-processing cost reduction and permissible delay in payments. Eur. J. Oper. Res. 202, 473–478 (2010)

    Article  MATH  Google Scholar 

  22. Jaber, M.Y., Osman, I.H.: Coordinating a two-level supply chain with delay in payments and profit sharing. Comput. Ind. Eng. 50(4), 385–400 (2006)

    Article  Google Scholar 

  23. Jaggi, C.K., Goyal, S.K., Goel, S.K.: Retailer’s optima replenishment decisions with credit-linked demand under permissible delay in payments. Eur. J. Oper. Res. 190, 130–135 (2008)

    Article  MATH  Google Scholar 

  24. Khouja, M., Mehrez, A.: Optimal inventory policy under different supplier credit policies. J. Manufact. Syst. 15, 334–339 (1996)

    Article  Google Scholar 

  25. Liao, J.J.: An EOQ model with non-instantaneous receipt and exponentially deteriorating items under two-level trade credit. Int. J. Prod. Econ. 113(2), 852–861 (2008)

    Article  Google Scholar 

  26. Liao, J.J., Chung, K.J.: An EOQ model for deterioration items under trade credit policy in a supply chain system. J. Oper. Res. Soc. Jpn. 52, 46–57 (2009)

    MathSciNet  MATH  Google Scholar 

  27. Moses, M., Seshadri, S.: Policy mechanisms for supply chain coordination. IIE Trans. 32, 245–262 (2000)

    Google Scholar 

  28. Ouyang, L.Y., Ho, C.H., Su, C.H.: Optimal strategy for an integrated system with variable production rate when the freight rate and trade credit are both linked to the order quantity. Int. J. Prod. Econ. 115, 151–162 (2008)

    Article  Google Scholar 

  29. Sarmah, S.P., Acharya, D., Goyal, S.K.: Coordination and profit sharing between a manufacturer and a buyer with target profit under credit option. Eur. J. Oper. Res. 182(3), 1469–1478 (2007)

    Article  MATH  Google Scholar 

  30. Sheen, G.J., Tsao, Y.C.: Channel coordination, trade credit an quantity discounts for freight cost. Trans. Res. Part E 43(2), 112–128 (2007)

    Article  Google Scholar 

  31. Thangam, A., Uthayakumar, R.: Two-echelon trade credit financing for perishable in a supply chain when demand depends on both selling price and credit period. Comput. Ind. Eng. 57, 773–786 (2009)

    Article  Google Scholar 

  32. Thangam, A., Uthayakumar, R.: Optimal pricing and lot-sizing policy for a two-warehouse supply chain system with perishable items under partial trade credit financing. Int. J. Oper. Res. 10, 133–161 (2010)

    Article  MATH  Google Scholar 

  33. Teng, J.T.: On the economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 53, 915–918 (2002)

    Article  MATH  Google Scholar 

  34. Teng, J.T., Goyal, S.K.: Optimal ordering policies for a retailer in a supply chain with up-stream and down-stream trade credits. J. Oper. Res. Soc. 58, 1252–1255 (2007)

    Article  Google Scholar 

  35. Teng, J.T., Chang, C.T.: Optimal manufacturer’s replenishment policies in the EPQ model under two levels of trade-credit policy. Eur. J. Oper. Res. 195, 358–363 (2009)

    Article  MathSciNet  MATH  Google Scholar 

  36. Teng, J.T.: Optimal ordering policies for a retailer who offers distinct trade credits to its good and bad credit customers. Int. J. Prod. Econ. 119, 415–423 (2009)

    Article  Google Scholar 

  37. Trivedi, M.: Distribution channels: an extension of exclusive retailer ship. Manag. Sci. 44(7), 896–909 (1998)

    Article  MATH  Google Scholar 

  38. Van Mieghem, J.A., Dada, M.: Price versus production postponement: capacity and competition. Manag. Sci. 45(12), 1631–1649 (1999)

    Google Scholar 

  39. Yao, D.Q., Liu, J.: Competitive pricing of mixed retail and e-tail distribution channels. Omega 33, 235–247 (2005)

    Article  Google Scholar 

Download references

Acknowledgments

The authors are thankful to the anonymous reviewers for their valuable comments and suggestions that helped in improving the quality of the paper. The first author gratefully acknowledges the financial support provided by the University Grants Commission, New Delhi, under UGC-DRS Program 2012–2016.

Author information

Authors and Affiliations

  1. Department of Mathematics, Jadavpur University, Kolkata, India

    B. C. Giri & T. Maiti

Authors
  1. B. C. Giri
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. T. Maiti
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to B. C. Giri.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Giri, B.C., Maiti, T. Trade credit competition between two retailers in a supply chain under credit-linked retail price and market demand. Optim Lett 8, 2065–2085 (2014). https://doi.org/10.1007/s11590-013-0702-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11590-013-0702-x

Keywords

Search

Navigation