Effects of human errors and trade-credit financing in two-echelon supply chain models

Abstract

This paper develops two centralised two-echelon supply chain models with the trade-credit financing and inspection errors. Both models follow a single-setup-multi-delivery (SSMD) policy and each delivery is designed using the just-in-time (JIT) method to increase the efficiency of the supply chain. In first model, the random defective rate is assumed and each delivered item goes through inspection process at the buyer's end due to the contract with vendor, because vendor gives a trade-credit support to buyer. In second model, human errors of Type I and Type II are considered due to tiredness and ignorance of the inspector during inspection process. The joint annual cost of supply chain is minimised with respect to order quantity and number of shipments. Finally, some numerical examples, sensitivity analysis, and graphical representations are given to illustrate more savings from existing literature. [Received 13 December 2015; Revised 19 June 2016; Accepted 28 June 2016]