Integrated Supply Chain Cooperative Inventory Model with Payment Period Being Dependent on Purchasing Price under Defective Rate Condition

Abstract

In most commercial transactions, the buyer and vendor may usually agree to postpone payment deadline. During such delayed period, the buyer is entitled to keep the products without having to pay the sale price. However, the vendor usually hopes to receive full payment as soon as possible, especially when the transaction involves valuable items; yet, the buyer would offer a higher purchasing price in exchange of a longer postponement. Therefore, we assumed such permissible delayed period is dependent on the purchasing price. As for the manufacturing side, defective products are inevitable from time to time, and not all of those defective products can be repaired. Hence, we would like to add defective production and repair rate to our proposed model and discuss how these factors may affect profits. In addition, holding cost, ordering cost, and transportation cost will also be considered as we develop the integrated inventory model with price-dependent payment period under the possible condition of defective products. We would like to find the maximum of the joint expected total profit for our model and come up with a suitable inventory policy accordingly. In the end, we have also provided a numerical example to clearly illustrate possible solutions.