Line-of-credit payment scheme and its impact on the retailer's ordering policy with inventory-level-dependent demand
type: Item
instance of: scholarly article
title: Line-of-credit payment scheme and its impact on the retailer's ordering policy with inventory-level-dependent demand
zbMATH Open document ID: 1400.90005
DOI: 10.1155/2016/4027454
author: Tao Jia
author: Feng Lin
author: Zhengwen He
author: Nengmin Wang
published in: Mathematical Problems in Engineering
publication date: 2018-10-12T00:00:00Z
review text: Summary: Practically, the supplier frequently offers the retailer credit period to stimulate his/her ordering quantity. However, such credit-period-only policy may lead to the dilemma that the supplier's account receivable increases with sale volume during delay period, especially for the item with inventory-level-dependent demand. Thus, a line-of-credit (LOC) payment scheme is usually adopted by the supplier for better controlling account receivables. In this paper, the two-parameter LOC clause is firstly applied to develop an economic order quantity (EOQ) model with inventory-level-dependent demand, aiming to explore its influences on the retailer's ordering policy. Under this new policy, the retailer will be granted full delay payment if his/her order quantity is below a predetermined quantity. Otherwise, the retailer should make immediate payment for the excess part. After analyzing the relationships among parameters, two distinct cases and several theoretical results can be derived. From numerical examples, two incentives, a longer credit period and a lower rate of the retailer's capital opportunity cost, should account for the retailer's excessive ordering policy. And a well-designed LOC clause can be applied to induce the retailer to place an appropriate ordering quantity and ensure the supplier maintains a reasonable account receivable.
Mathematics Subject Classification ID: 90B05
zbMATH DE Number: 6953149
Wikidata QID: Q59131229
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2016/4027454
OpenAlex ID: W2521628379
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description: scientific article; zbMATH DE number 6953149