Microsoft Word - 2 OPTIMAL SHIPMENTS, ORDERING AND PAYMENT POLICIES FOR INTEGRATED SUPPLIER-BUYER D

In this research, an integrated supplier-buyer inventory system is studied when market demand is price-sensitive trapezoidal and units in inventory are subject to deterioration at a constant rate. The buyer has an option to choose between discount in unit price and delay in settling the account against the purchases made offered by the supplier. This type of trade credit is termed as ‘net credit’. In this scenario, if the buyer settles payment within the stipulated time period 1 M , then the buyer receives a cash discount; otherwise the full payment must be paid by the time 2 M ; where 2 1 0 M M . > ≥ The joint profit per unit time of supplierbuyer is maximized with respect to selling price, purchase quantity, number of transfers from the supplier to the buyer and payment time. An algorithm is outlined to obtain optimal solution. The numerical example is given to validate the proposed formulation. The managerial issues are deduced through sensitivity analysis of inventory parameters.