Inventory Policy In The Integrated Supply Chain Under Trade Credit

As the pressure of market competition increases, inventory problem in supply chain management becomes a hot topic in economic management. However, research on inventory problem mainly focuses on a single sector of a supply chain, and few paper has studied integrated supply chains. In order to saving cost effectively, this paper aims at offering optimal inventory policies of integrated supply chains under trade credit. Trade credit strategy can increase trust and cooperation of different enterprises in the supply chain, and is also an approach achieving win-win for every part of the supply chain.In this paper, the influence of trade credit strategy on inventory cost of a integrated supply chain is analyzed, based on researches on the inventory of the single enterprise in a supply chain. Inventory models and cost functions of single retailer and single supplier are established, respectively, under different assumptions about demand functions and shortage backlogging functions. First, by considering the total cost of the retailer and the supplier, the inventory model and cost function of a integrated supply chain are established when time of order and delivery, size of trade credit, and shortage period are fixed. Optimal replenishment frequency of the vendor and the shortage time factor of the retailer were obtained by minimizing the total cost. Second, the inventory model and cost function of a integrated supply chain are reestablished when products are ordered and distributed at different times, and the retailer takes two-phase pricing. Moreover, a corresponding algorithm is designed to achieve the optimal inventory policy in different operating modes of a integrated supply chain. Third, the cost function is reestablished in different shortage situations and a new algorithm is provided to obtain vendor's optimal replenishment frequency and retailer's time coefficients of the different shortage. Finally, numerical examples are presented to verify that our proposed algorithms work effectively.