Replenishment Decisions For Deteriorating Items Under Two-Level Trade Credit

Nowadays, with the market competition becoming increasingly fierce, trade credit is more and more popular as a crucial proportion of company finance in a supply chain system. Meanwhile the deterioration of the items is a kind of normal phenomenon in inventory management. It will influence the retailer’s on-hand inventory level, and then influence the service level and the frequency of the retailer’s orders. Therefore, how to reasonably use the advantage of trade credit, stimulate the consumers’demand, achieve the optimization configuration of the company and reduce the deterioration cost as much as possible through effective inventory management has become an important topic in modern management.This thesis mainly discusses the following two contents by using theoretical analysis, mathematical modeling and simulation method, which aims to optimize the total cost of an inventory system.(a) Optimal replenishment decisions for deteriorating products with limited storage capacity under two-level trade credit. This part establishes a mathematical model for inventory system for deteriorating items under two level trade credit. In this study we incorporate the following concepts:(1) the storage capacity of own warehouse (OW) is limited; (2) the trade credit offered by the supplier is linked to order quantity; (3) the interest charged about the deteriorating goods during the replenishment cycle is considered. The objective function to be optimized is considered as the total cost of an inventory system. At last, some numerical examples are also given to illustrate the theoretical results and some important managerial insights are obtained.(b) Optimal replenishment decisions for deteriorating items with allowable shortage under two-level trade credit. This part establishes an EOQ model for deteriorating items under two-level credit trade and incorporates the following issues:(1) shortage is allowed; (2) interest caused by backordered items which fulfilled the customers at the beginning of the replacement is considered. The objective function to be optimized is considered as the total annual cost of an inventory system. In addition, several numerical examples are also given to illustrate the theoretical results and some important managerial insights are obtained.In this thesis, we add some realistic assumptions into the inventory model for deteriorating items under two level trade credit. The results obtained not only can enrich the contents of researching on this model study, but also provide the retailer more sufficient theoretical evidence to make ordering decisions.