Supply chain model with price- and trade credit-sensitive demand under two-level permissible delay in payments

The paper investigates a two-echelon production-delivery supply chain model for products with stochastic demand and backorder-lost sales mixture under trade-credit financing. The manufacturer delivers the retailer's order quantity in a number of equal-sized shipments. The replenishment lead-time is such that it can be crashed to a minimum duration at an additional cost that can be treated as an investment. Shortages in the retailer's inventory are allowed to occur and are partially backlogged with a backlogging rate dependent on customer's waiting time. Moreover, the manufacturer offers the retailer a credit period which is less than the reorder interval. The model is formulated to find the optimal solutions for order quantity, safety factor, lead time, and the number of shipments from the manufacturer to the retailer in light of both distribution-free and known distribution functions. Two solution algorithms are provided to obtain the optimal decisions for the integrated system. The effects of controllable lead time, backorder rate and trade-credit financing on optimal decisions are illustrated through numerical examples.

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Supply chain coordination with trade credit and price discount with/without environmental considerations

10.32920/ryerson.14651781 ◽

2021 ◽

Author(s):

Salem Mousa Salem Aljazzar

Keyword(s):

Supply Chain ◽

Trade Credit ◽

Supply Chain Coordination ◽

Performance Measure ◽

Sensitivity Analyses ◽

Total System ◽

Permissible Delay In Payments ◽

Price Discounts ◽

Trade Credits ◽

Delay In Payments

For a supply chain coordination to be effective and profitable, it requires a working mechanism among its members to entice some players to join a partnership. Two of the well-known trade credits that are widely used by businesses are the permissible delay in payments and price discounts. This thesis presents models for coordinating supply chains with both trade credits. The first model investigates the effect of utilizing delay in payments in a two-level (manufacturer-retailer) supply chain. It modifies and analyzes three known models of different production and shipping policies to account for delays in payments; it then compares them and highlights the production policy that performed the best with the total system cost being the performance measure. The second model analyzes the coordination of a three-level (supplier-manufacturer- retailer) supply chain with the delay in payments. It analyzes nine different scenarios of permissible delay among the three players. A simulation study was performed and a thorough analysis of the results was used to identify the limitations of all scenarios and to draw some managerial insights and findings. The third model investigates the effect of coupling permissible delay in payments and price discounts for coordinating a three-level. The analysis considers nine different cases of delay-in-payments along with eight cases of price discounts among the three players in the supply chain, totaling seventy-two cases. The numerical examples and the sensitivity analyses show that the coupling of delay-in- payments and price discounts maximizes the supply chain profit more than when using a single mechanism at a time. The fourth model investigates a two-level supply chain by studying the effects of various scenarios for delay-in-payments when including some environmental costs such as fuel and emissions from manufacturing and transportation. The objective of the model is to optimize the environmental and the economic performance of the supply chain. The results show that delay-in-payments improves the economic and the environmental performance of a supply chain.

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