The optimal replenishment decisions under two levels of trade credit policy depending on the order quantity

In real-life situations, suppliers usually offer a grace period to the wholesaler and the wholesaler also adopts the similar trade credit policy to its retailer. In general, the delay in payments often depends on the quantity ordered. That is, the favorable credit terms are provided when the purchaser have a large order quantity. Accordingly, this study is proposed to determine the optimal replenishment decisions under two levels of trade credit policy if the purchasers order quantity is greater than or equal to a predetermined quantity. The minimization of the total variable costs per unit time is taken as the objective function, in which some theorems are also developed to determine the optimal cycle time for the wholesaler. Furthermore, this study collected previous published models as special cases and several other numerical examples to illustrate the theoretical results and obtain the managerial insights.