Optimising an integrated production-inventory system under cash discount and retailer partial trade credit policy

摘要

In this article, we develop a single-manufacturer, single-retailer production-inventory model considering price-sensitive demand and a two-level trade credit policy. The manufacturer adopts a 'two-part strategy', viz. cash discount and delayed payment while offering trade credit to the retailer. The retailer, on the other hand, offers a partial trade credit to his/her customers. We model the integrated production-inventory system as a profit maximisation problem and design iterative algorithms to determine the optimal decisions. A numerical example is taken to illustrate the developed model. Sensitivity analysis is carried out to study the influence of key model parameters on the optimal solution. Finally, the performance of the integrated model is also compared with the non-integrated model.