| The notion of a trade credit period is a common business practice, where a supplier allows a buyer a specified period to make a payment in full for a purchase made. The objective of this thesis is to explore the role of such a credit payment option in supply chain management. Towards this end, a two-echelon supply chain, consisting of a single supplier (e.g. manufacturer) and the cases of both a single and multiple buyers (e.g. retailers) is examined under decentralized (independent) and centralized (coordinated) decision making scenarios. The major emphasis of this research is limited to the case of a single product with price-sensitive deterministic, as well as stochastic market demand.;The conditions under which a trade credit period should be offered and its appropriate length are determined from the supplier's perspective under the decentralized case. Under the centralized decision scenario, the efficacy of a trade credit policy as a supply chain coordination mechanism is thoroughly analyzed and guidelines for pricing, production and delivery decisions are developed. The concepts developed in this study are illustrated via a number of numerical examples, in conjunction with thorough sensitivity analyses involving some selected problem parameters.;The major contribution of this thesis is that we incorporate the pricing and inventory issues in supply chains with an endogenous credit payment period. This is the first study that examines the efficacy of trade credit option as a coordination mechanism. We propose a coordination mechanism that coordinates the supply chain, when a trade credit by itself is not sufficient to serve such a purpose, while preserving the benefits of a trade credit option. Also, this study is the first to examine the issues concerning trade credit under price sensitive stochastic demand. Another first for this work is the exploration of the implications of a trade credit policy in supply chains consisting of multiple competing retailers. The effects of the extent of competition and the market size on trade credit policy are evaluated. Our analyses lead to some important practical implications, to serve as managerial guidelines. |
