Business, Management and Accounting
4 years ago

Retailers can boost profits by offering flexible trade credit to customers.

Journal of Uncertain Systems
Retailer’s Operational Decision Based on EOQ Model with Upstream Flexible Two-Part Trade Credit and Downstream Partial Trade Credit
Yi Zhang, Jinwu Gao

Paper Summary

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The article explores how retailers make decisions about inventory when using a type of trade credit called flexible two-part trade credit. The researchers used a mathematical method to figure out the best way for retailers to order products, pay suppliers, and offer credit to customers. They found that small discounts from suppliers don't affect retailers much, the length of credit given to customers affects their behavior more than retailers', and retailers can manage risk by offering partial credit to customers.