International Journal of Advanced Culture Technology

The International Promotion Agency of Culture Technology (국제문화기술진흥원)
권호 표지
DOI QR코드

DOI QR Code

Buyer's Price and Inventory Policy with Price Dependent Demand for Decaying Items Day terms Supplier Credit in a Two-stage Supply Chain

  • Received : 2018.07.13
  • Accepted : 2018.08.10
  • Published : 2018.09.30
Download PDF
⟨ Previous Next ⟩

Abstract

In deriving the economic order quantity (EOQ) formula, it is tacitly assumed that the buyer has to pay product price while receiving the product from the supplier. However, as a marketing policy, some suppliers permit a delay in payments to the buyers to increase demand for the product they made. Credit transactions would have a positive effect on both suppliers and buyers. For a supplier who offers trade credit, it is an effective means of price differentiation to increase the demand for the product. Availability of opportunity to delay the payment in buyer effectively reduces the cost of holding stocks and therefore, the buyer has a lot of price options to choose his sales price for a customer. Since the buyer's order is affected by the customer's demand, the problems of determining the sales price and EOQ are interdependent and must be solved simultaneously. From this perspective, this paper evaluates the problem of determining the optimal sales price and EOQ for the buyer at the same time when the supplier allows a delay in payments for the product whose demand is represented as a function that decreases linearly with the sales price. For the analysis, it is also assumed that inventory is exhausted not only by customer's but also by decay.

Keywords

References

  1. S. W. Shinn, "Buyer's pricing and lot-sizing policy with price dependent demand under day terms supplier credit in a two-stage supply chain," Asia-pacific Journal of Multimedia Services Convergent with Art, Humanities, and Sociology, Vol.7, No.12, pp.717-720, 2017.
  2. S. K. Goyal, "Economic order quantity under conditions of permissible delay in payments," Journal of Operational Research Society, Vol.36, No.4, pp.335-338, 1985. https://doi.org/10.1057/jors.1985.56
  3. J. T. Teng, C. T. Chang, M. S. Chern and Y. L. Chan, "Retailer's optimal ordering policies with trade credit financing," International Journal of Systems Science, Vol.38, No.3, pp.269-278, 2007. https://doi.org/10.1080/00207720601158060
  4. V. B. Kreng and S. J. Tan, "The optimal replenishment decisions under two levels of trade credit policy depending on the order quantity," Expert Systems with Applications, Vol.37, pp.5514-5522, 2010. https://doi.org/10.1016/j.eswa.2009.12.014
  5. H. C. Chang, C. H. Ho, L. Y. Ouyang and C. H. Su, "The optimal pricing and ordering policy for an integrated inventory model when trade credit linked to order quantity," Applied Mathematical Modelling, Vol.33, pp.2978-2991, 2009. https://doi.org/10.1016/j.apm.2008.10.007
  6. C. Y. Dye and L. Y. Ouyang, "A particle swarm optimization for solving joint pricing and lot-sizing problem with fluctuating demand and trade credit financing," Computers & Industrial Engineering, Vol.60, pp.127-137, 2011. https://doi.org/10.1016/j.cie.2010.10.010
  7. L. Y. Ouyang, C. H. Ho, and C. H. Su, "An optimization approach for joint pricing and ordering problem in an integrated inventory system with order-size dependent trade credit," Computers & Industrial Engineering, Vol.57, pp.920-930, 2009. https://doi.org/10.1016/j.cie.2009.03.011
  8. T. Avinadav, A. Herbon and U. Spiegel, "Optimal ordering and pricing policy for demand functions that are separable into price and inventory age," International Journal of Production Economics, Vol.155, pp.406-417, 2014. https://doi.org/10.1016/j.ijpe.2013.12.002
  9. J. Shi, R. Y. K. Fung and J. Guo, "Optimal ordering and pricing policies for seasonal products: Impacts of demand uncertainty and capital constraint," Discrete Dynamics in Nature and Society, Vol.2016, Article ID 1801658, pp.1-13, 2016.
  10. P. M. Ghare and G. F. Schrader, "A model for an exponential decaying inventory," Journal of Industrial Engineering, Vol.14, pp.238-243, 1963.
  11. M. A. Cohen, "Joint pricing and ordering policy for exponentially decaying inventory with known demand," Naval Research Logistics Quarterly, Vol.24, pp.257-268, 1977. https://doi.org/10.1002/nav.3800240205
  12. T. H. Chen and H. M. Chang, "Optimal ordering and pricing policies for deteriorating items in one-vendor multi-retailer supply chain," International Journal of Advanced Manufacturing Technology, Vol.49, pp.341-355, 2010. https://doi.org/10.1007/s00170-009-2377-0
  13. G. C. Mahata and A. Goswami, "An EOQ model for deteriorating items under trade credit financing in the fuzzy sense," Production Planning & Control: The Management of Operations, Vol.18, pp.681-692, 2007. https://doi.org/10.1080/09537280701619117
  14. Y. C. Tsao and G. J. Sheen, "Joint pricing and replenishment decisions for deteriorating items with lot-size and time-dependent purchasing cost under credit period," International Journal of Systems Science, Vol.38, No.7, pp.549-561,2007. https://doi.org/10.1080/00207720701431144