Determining Optimal Ordering Policy for Deteriorating Products Under the Trade Credit Incentives

This paper studies the retailer´s ordering size for deteriorating products under the condition of trade credit offered by the supplier. We introduce to determine the interest charged by the supplier with the total unpaid purchasing cost. Under the assumption of determinate demand and determinate deteriorating rate, we derive an optimal ordering policy for deteriorating products. The paper also provides numerical example that illustrates the value of trade credit and make the sensitivity analysis to the value of credit period, selling price and the deteriorating rate.