An inventory model with stochastic demand under conditionally permissible delay in payments

Researchers in the past have established the newsvendor model with rarely considering trade credit. In practices, the supplier usually provides the retailer a permissible delay in payments to stimulate more order quantity. As a result, we try to establish an inventory model for stochastic demand, in which the supplier provides trade credit to the retailer if the order quantity is greater than or equal to a predetermined quantity. The residual or shortage at the end of the cycle is dealt as the newsvendor problem. Two useful theorems to determine the optimal order quantity are derived. Several numerical examples are provided to illustrate the results. The sensitivity analysis on main parameters is presented.