AN EOQ MODEL FOR TWO LEVEL CREDIT POLICY ORDER RANDOM INPUT

Abstract

In this article, a mathematical model is developed to study the optimal retailer’s replenishment decisions under two levels trade credit scenario when production rate of the supplier is finite and units received by retailer are random. By two levels of trade credit means that the supplier offer a delay period, M (say) to the retailer and retailer passes it (say) N, to his customer. The retailer’s credit period N offered to the customer is less than the supplier’s allowable credit period M to the retailer. The optimal replenishment policy is established by minimizing total expected cost of an inventory system. The easy-to-use algorithm is given to search for optimal replenishment policy. Finally, numerical examples are given to validate the derived model.