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Abstract
This paper presents a joint inventory policy that involves price negotiation, inventory-dependent demand, and deterioration under two-level trade credit in a coordinated model. The model allows realistic seller-buyer interactions through specification of the selling price, and thus reflects more closely supplier–buyer bargaining asymmetries in integrated supply chains. The demand is a function of the on-hand inventory and negotiated price and the inventory levels deplete continuously by customer occurrences and physical decay. The effect of cash flow pressure in the form of delayed (credit) payment is addressed via a two-level trade credit structure; an interest-free period and then an interest-incurring delay, consequently aligning inventory decisions with financial constraints. A user-friendly graphical interactive interface (GUI) is designed to obtain numerical solutions of the inventory differential equation, visualize trajectories of inventories and demands, and calculate the total collaborative cost of order quantity for holding, purchasing, ordering, deterioration and interest which is summed over both sides. Based on the simulation results, it is shown that the negotiation power and credit terms together with deterioration rate have a strong impact on both inventory behaviours and total system cost for numerical examples, significant advantage of cooperation decision rather than isolated decisions vendor or buyer. The model is highly suitable as a decision-making tool for enhancing and studying collaborative supply chain performance from integrated operational and financial perspectives.
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References
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