Supply Chain with Customer-Based Two-Level Credit Policies under an Imperfect Quality Environment

Abstract

The present model develops a three-echelon supply chain, in which the manufacturer offers full permissible delay to the whole seller, while the latter, in turn, adopts distinct trade credit policies for his subsequent downstream retailers. The type of credit policy being offered to the retailers is decided on the basis of their past profiles. Hence, the whole seller puts forth full and partial permissible delays to his old and new retailers respectively. This study considers bad debts from the portion of new retailers who fail to make up for the delayed part of the partial payment. The analysis shows that it is beneficial for the whole seller to make shorter contracts, particularly with new retailers, along with the fetching of a higher fraction of initial purchase cost from them. In addition to the above-described scenario, the lot received by the whole seller from the manufacturer is not perfect, and it contains some defects for which he employs an inspection process before selling the items to the retailers. In order to make the study more realistic, Type-I, as well as Type-II misclassification errors, and the case of out-of-stock are considered. The impact of Type-I error has been found to be crucial in the study. The present paper determines the optimal policy for the whole seller by maximizing the expected total profit per unit time. For the optimality of the solution, theoretical results are provided. Finally, a numerical example and a sensitivity analysis are done to validate the model.

Pricing Decision within an Inventory Model for Complementary and Substitutable Products

“…The business can be spread through multiple number of retailers. Extra service facilities can be included within the study [45][46][47][48] for deteriorating products and non-zero random lead time. The quality improvement [49,50] and preservation technology [28,29] for deteriorating products can improve the study in a realistic way.…”

Joint Inventory and Pricing Policy for an Online to Offline Closed-Loop Supply Chain Model with Random Defective Rate and Returnable Transport Items

“…Sarkar et al [58] studied warranty, optimal run time with inspection errors in the imperfect production system, and Kang et al [59] discussed optimal ordering policies for the imperfect production system. Recently, Khanna et al [60] considered two-level credit policies with imperfect quality, Tayyab et al [61] considered process uncertainty, and Tayyab et al [62] studied the multistage imperfect production system. The majority of the existing literature considered rework or scrap option for defective items, however, this paper considers salvage option for defective items.…”

Retailer’s joint pricing model through an effective preservation strategy under a trade-credit policy

“…Cárdenas-Barrón and Sana [5], Panda et al [35], and Cárdenas-Barrón et al [6] described in their paper that for maintaining the better decision, the management always takes several strategies to earn more based on the promotional policies using the variable demand and product deterioration. Therefore, in several studies, some researchers tried to incorporate this vital matter [2,19,20,41], but none developed the combination of preservation of products where the trade-credit policy was adopted under variable demand.…”