Supplier–buyer deterministic inventory coordination with trade credit and shelf-life constraint

The purpose of the paper is to formulate a collaborative mechanism for optimising the replenishment schedule under trade credit and shelf-life constraint in a two-echelon supply chain. We first derive the necessary and sufficient conditions to obtain the optimal replenishment policy for the non-integrated and collaborative scenarios, respectively. Then, for additional cost savings realised from coordination, we focus on discussing how to determine the equitable trade credit period, and propose an efficient solution procedure to determine the optimal replenishment schedule and coordination results. Finally, two industrial examples are used to illustrate the proposed strategy and algorithm, and the sensitivity analysis of the optimal result with respect to major parameters is presented. The sensitivity analysis suggests that the number of replenishment cycles is optimal in almost all cases under coordination and the buyer's savings in percentage is much greater than the supplier's savings in percentage. The major contribution of the paper is that we incorporate shelf-life into supply chain coordination with trade credit. In real-life situations, this proposed strategy may be applied in shelf-life products.