OPTIMAL PRICING, ORDERING, AND CREDIT PERIOD POLICIES FOR DETERIORATING PRODUCTS UNDER ORDER-LINKED TRADE CREDIT

Tsao, Yu-Chung and Fauziah, Hanifa-Astofa and Vu, Thuy-Linh and Masrurohand, Nur-Aini (2022) OPTIMAL PRICING, ORDERING, AND CREDIT PERIOD POLICIES FOR DETERIORATING PRODUCTS UNDER ORDER-LINKED TRADE CREDIT. JOURNAL OF INDUSTRIAL AND MANAGEMENT OPTIMIZATION, 18 (6). pp. 4151-4182. ISSN 1547-5816

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Abstract

In the modern global economy, trade credit financing is typical in business transactions for both sellers and buyers. The seller offers a credit period to attract new buyers or stimulate demand, and the buyer takes the opportunity to accumulate revenue. To obtain this benefit, the seller prefers trade credit policies that are dependent on the quantity ordered, referred to as order-linked trade credit. The buyer can obtain the benefits from a fully delayed payment if their order is sufficiently large. Similarly, the seller can sell many products while granting a credit period. Otherwise, the buyer receives only partial trade credit, and the seller can take the opportunity of both cash and credit payments. In this study, an economic order quantity (EOQ) inven-tory model for deteriorating products, under default risk control-based trade credit, is formulated using a discounted cash flow approach. The seller offers to the buyer order-linked trade credit with price-and credit-period-dependent demand. The optimal selling price, credit period policies, and replenishment cycle time are determined simultaneously, while maximizing the present value of the seller's total profit. Moreover, this research provides numerical examples and sensitivity analysis to illustrate the theoretical results, solution procedure, and gain managerial insights. 200 words.

Item Type: Article
Uncontrolled Keywords: EOQ inventory model; deterioration product; order-linked trade credi; discounted cash-flow
Subjects: T Technology > TJ Mechanical engineering and machinery
Divisions: Faculty of Engineering > Mechanical and Industrial Engineering Department
Depositing User: Sri JUNANDI
Date Deposited: 15 Oct 2024 01:28
Last Modified: 15 Oct 2024 01:28
URI: https://ir.lib.ugm.ac.id/id/eprint/9348

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