International Journal of Advanced Culture Technology

The International Promotion Agency of Culture Technology (국제문화기술진흥원)
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Sensitivity Analysis of JLSP Inventory Model with Ordering Cost inclusive of a Freight Cost under Trade Credit in a Two-stage Supply Chain

  • Shinn, Seong-Whan (Department of Advanced Materials & Chemical Engineering, Halla University)
  • Received : 2020.07.27
  • Accepted : 2020.08.30
  • Published : 2020.09.30
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Abstract

This study analyzes the distributor's inventory model in a two-stage supply chain consisting of the supplier, the distributor and the end customer. The supplier will allow a credit period before the distributor settles the account with him in order to stimulate the demand for the product he produces. It is also assumed that the distributor pays the shipping cost for the order and hence, the distributor's ordering cost consists of a fixed ordering cost and the shipping cost that depend on the order quantity. The availability of the delay in payments from the supplier enables discount of the distributor's selling price from a wider range of the price option in anticipation of increased customer's demand. As a result, the availability of a credit transaction leads to an increase in inventory levels. On the other hand, in the case of deteriorating products in which the utility of the product perish over time, the deterioration rate with time plays a role in reducing inventory levels. In this regard, we analyze the effect of the length of the credit period and the degree of product deterioration on the distributor's inventory level. For the analysis, we formulate the distributor's annual net profit and analyze the effect of the length of credit period and deterioration rate of the product on inventory policy numerically.

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References

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