Title: Integrated supplier-buyer cooperative models with price-dependent demand and process quality improvement under two-part trade credit policy

Authors: Hsien-Jen Lin

Addresses: Department of Applied Mathematics, and Department of Finance and Actuarial Science, Aletheia University, Tamsui, New Taipei City 25103, Taiwan

Abstract: This paper deals with an integrated supplier-buyer inventory model with process quality improvement where market demand is sensitive to the retail price and the supplier adopts two-part trade credit policy. The model has some insights in order to obtain optimal strategy of a business firm. The objectives of this paper are twofold. Firstly, we want to correct and improve the recently studied model by simultaneously optimising order quantity, defective rate, retail price, and number of shipments from the supplier to the buyer to maximise the joint total profit. Secondly, we consider that the demand rate is retail price dependent and the production rate is finite and proportional to the demand rate to fit the real-life situations. For the proposed model, a computational algorithm is proposed for determining the optimal solution. Furthermore, numerical examples are provided to illustrate the modelling idea and effectiveness of the algorithm. Sensitivity analysis is conducted and some managerial implications are presented.

Keywords: integrated inventory model; two-part trade credit; price elasticity; quality improvement; capital investment; credit period; systems engineering.

DOI: 10.1504/IJISE.2019.099779

International Journal of Industrial and Systems Engineering, 2019 Vol.32 No.1, pp.120 - 135

Received: 28 Mar 2017
Accepted: 10 Sep 2017
Published online: 22 May 2019 *

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