Optimal Replenishment Decisions under Two-Level Trade Credit with Partial Upstream Trade Credit Linked to Order Quantity and Limited Storage Capacity

Abstract EN

This paper extends the previous economic order quantity (EOQ) models under two-level trade credit such as Goyal (1985), Teng (2002), Huang (2003, 2007), Kreng and Tan (2010), Ouyang et al.

(2013), and Teng et al.

(2007) to reflect the real-life situations by incorporating the following concepts: (1) the storage capacity is limited, (2) the supplier offers the retailer a partially upstream trade credit linked to order quantity, and (3) both the dispensable assumptions that the upstream trade credit is longer than the downstream trade credit N

We then study the necessary and sufficient conditions for finding the optimal solution for various cases and establish a useful algorithm to obtain the solution.

Finally, numerical examples are given to illustrate the theoretical results and provide the managerial insights.