An optimal ordering policy with partial permissibly delay under two-level payments

This paper discusses the optimum order quantity of the EOQ model that is not only dependent on the inventory policy but also on firm´ credit policy. To reduce default risks, in practice, a supplier frequently offers a partial down-stream trade credit to its customers who must pay a portion of the purchase amount at the time of placing an order as a collateral deposit, and then receive a permissible delay on the rest of the outstanding amount. In this paper, we firstly establish an EOQ model for a supplier who gives a full trade credit to its good retailer and a partial trade credit to its bad retailer. And then we extend the model for two levels, the retailer offers a full trade credit to its customers at the same time.