Title: The retailer's procurement policy with credit-linked demand under inflationary conditions

Authors: Chandra K. Jaggi, Aditi Khanna

Addresses: Department of Operational Research, University of Delhi, Delhi 110007, India. ' Department of Operational Research, University of Delhi, Delhi 110007, India

Abstract: The one-stage credit policy is a situation that arises, under a permissible delay in payments, when the supplier offers a credit period to the retailer, but the latter does not offer any credit period to his/her customers. However, this type of credit policy is debatable in most business transactions. In reality, the retailer also adopts the credit policy to stimulate his/her own demand. Such a situation, where both the supplier and the retailer offer the credit period to their respective customers, is termed two-stage credit policy. Moreover, nowadays it is a well-known fact that the credit period offered by the retailer to the customers has a positive impact on the demand of an item. Keeping this in mind, a credit-linked demand function has been considered. Further, the inflation and time value of money also play a very vital role in determining the procurement policy of the retailer, specifically in developing countries. Based upon these arguments, the present paper addresses the retailer|s procurement policy, where the decision is influenced by the inflation and time value of money under a permissible delay in payments, for a credit-linked demand function. The main objective is to maximise the retailer|s profit by jointly optimising his credit as well as the procurement period. Results have been illustrated with the help of a numerical example. Computational results provide some interesting policy implications.

Keywords: inventory; credit-linked demand; two-stage credit policy; delay in payments; inflation; retailers; procurement policy.

DOI: 10.1504/IJPM.2009.023405

International Journal of Procurement Management, 2009 Vol.2 No.2, pp.163 - 179

Published online: 20 Feb 2009 *

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