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Supplier–retailer inventory coordination with credit term for inventory-dependent and linear-trend demand



In this paper, a nonintegrated and collaborative replenishment policy is considered, respectively, which incorporates varying demand depending on both inventory level and time during the finite planning horizon. For additional cost savings realized from coordination, the paper adopts trade credit as a cost-saving shift means and introduces a brand new parameter, that is, credit period rate. Then, the equitable credit period rate is determined, and different values of the credit period rate reflect the allocation of additional cost savings between the supplier and retailer. Furthermore, the conditions for the existence and uniqueness of an optimal solution are proved for the nonintegrated and collaborative replenishment policy, and an efficient solution procedure is developed to determine the optimal results and coordination of the inventory model. Finally, several numerical examples are provided to illustrate the proposed strategy and algorithm, and the sensitivity analysis of the optimal solution with respect to each parameter is presented. The sensitivity analysis suggests that the size of the credit period rate has a strong relationship with the supplier's and retailer's inventory cost (including capital cost) and setup cost. In real-life situations, this proposed strategy may be applied to some consumer products in the growth phase or best-selling consumer goods, etc.