A two-level supply chain model with trade credit and imperfect production process

Abstract

In this article, we discuss a production-distribution inventory model with a single-vendor and single buyer under imperfect production process. Trade credit is offered by the supplier, who encourages the retailer to buy more products. The lead time and the vendor's setup cost are reduced by an added cost. Two models are proposed in this article. In the first model, the lead time demand is allowed to follow a normal distribution and another model is framed with distribution free lead time demand. The objective of this work is to frame the model under imperfect production process and delay in payment and to investigate the impact of product defective rate on the expected total cost of the integrated system. The optimal values of order quantity, lead time, setup cost and the number of shipments from vendor to the buyer are found. Efficient computational algorithms for both the models are designed and managerial insights are obtained.