An Ordering Policy under Two-level Trade Credit Policy with Allowable Shortage and Permissible Delay in Payments

In this paper, a model is developed to determine retailer's inventory policy under two-level trade credit system. It is assumed that the retailer has a powerful position so that he can obtain the full trade credit offered by supplier whereas customer can obtain just the partial trade credit from the retailer. The proposed model also allows fully backlogged shortages. This robust Mathematical model considers price dependent demand and is developed for various cases in which the length of the cycle is divided into two parts, i.e., length of the period with positive stocks and length of the period with negative stocks. The ultimate aim of the study is to minimize the total cost of the retailer by finding the optimum order quantity. Numerical examples and Sensitivity analysis are presented to prove the validity of the model.