Supply chain optimal ordering model for short life cycle products under two-level trade credit with default risk

One of the important issues in ordering policies is permissible delay in payments. The majority of previous ordering models with trade credit utilize the Economic Order Quantity model. This paper studies the ordering model for short life cycle products with trade credit based on the newsvendor model. This paper assumes that the manufacturer offers the wholesaler a permissible delay period, and the wholesaler provides the retailer with a permissible delay period in a three-echelon supply chain. An improved supply chain ordering policy model is presented that includes the time value of capital during the trade credit period and the default risk when total income is less than the trade credit amount. Furthermore, the conditions for the existence and uniqueness of optimal lot-size or production quantity are proved for the supply chain members under decentralized replenishment policy. Finally, two numerical examples and sensitivity analysis are provided to illustrate the proposed strategy.