Retailer's pricing and lot sizing policy under the condition of permissible delay in payments

Abstract

This thesis deals with the problem of determining the retailer``s optimum policy under the condition of permissible delay in payments. A major reason for the supplier to offer a credit period to the retailers is to stimulate the demand for the product he produces. In this study, the positive effects of credit period on the product demand is integrated into the EOQ model through the consideration of retailing situations where the demand rate is a function of the selling price the retailer sets for the product. Since the retailer``s lot size is affected by the demand rate of the product, the problems of determining the retail price and lot-size(we will call the RPLS problem) are interdependent and solved simultaneously. The first part of this thesis is concerned with the RPLS problem in which the retail demand rate of the product is represented by a constant price elasticity function of the retail price and the supplier provides a certain fixed credit period for settling the amount the retailer owes to him. Two kinds of products, nondeteriorating and deteriorating products, are considered for the analysis. In the second part, the RPLS problem is considered where the freight cost has a quantity discount. A constant price elasticity function of the retail price for the retail demand and the existence of a fixed credit period are assumed. The third part deals with basically the same problem as the first part. The only difference is that the supplier permits delay in payments where the length of delay is a function of the total retail volume. Finally, we consider an EOQ problem in which the demand rate of the product is a function of the on-hand inventory level under the condition of permissible delay in payments. Both nondeteriorating and deteriorating products are considered for the problem. For each model developed, solution procedure is presented. Also, numerical examples are solved to illustrate the algorithms and the effect of credit period on the retailing pol...