The Optimal Retailer’s Economic Production Quantity (EPQ) Policies with Two-Level Trade Credit under Alternate Due Date of Payment and Limited Storage Capacity

In recent years, many researchers investigated and developed the Economic Production Quantity (EPQ) model under permissible delay in payment. There are two payment terms which are usually being used. If a customer buys one item from a retailer at time t belonging to the time-interval [0,N], then the customer will have a trade-credit period N −t and will make the payment at time N. The other payment term (alternate due date) is when a customer buys one item from a retailer at time t belonging to [0,T], the customer will have a trade-credit period N and will make the payment at time N+t. This paper develops a two-level trade-credit model with a finite replenishment rate by considering an alternate due date of payment and limited storage capacity together. Four theorems are developed in this investigation with a view to characterizing the optimal solutions according to cost-minimization strategy. Finally, sensitivity analyses are executed to investigate the effects of the various parameters on the ordering policies and the annual total relevant costs. Several interesting results are also considered in order to make several managerial suggestions