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Advances in Decision Sciences
Volume 2014 (2014), Article ID 340135, 11 pages
http://dx.doi.org/10.1155/2014/340135
Research Article

An Economic Order Quantity Model with Completely Backordering and Nondecreasing Demand under Two-Level Trade Credit

Zohreh Molamohamadi,1 Rahman Arshizadeh,2 Napsiah Ismail,1 and Amir Azizi3

1Department of Mechanical and Manufacturing Engineering, University Putra Malaysia, 43400 Serdang, Selangor, Malaysia
2Department of Computer Engineering, Islamic Azad University, Science and Research Branch, Simon Boulevard, Ashrafi Esfahani Highway, Tehran 1477893855, Iran
3Faculty of Manufacturing Engineering, Universiti Malaysia Pahang, 26600 Pekan, Pahang, Malaysia

Received 31 July 2014; Accepted 5 December 2014; Published 31 December 2014

Academic Editor: David Bulger

Copyright © 2014 Zohreh Molamohamadi et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In the traditional inventory system, it was implicitly assumed that the buyer pays to the seller as soon as he receives the items. In today’s competitive industry, however, the seller usually offers the buyer a delay period to settle the account of the goods. Not only the seller but also the buyer may apply trade credit as a strategic tool to stimulate his customers’ demands. This paper investigates the effects of the latter policy, two-level trade credit, on a retailer’s optimal ordering decisions within the economic order quantity framework and allowable shortages. Unlike most of the previous studies, the demand function of the customers is considered to increase with time. The objective of the retailer’s inventory model is to maximize the profit. The replenishment decisions optimally are obtained using genetic algorithm. Two special cases of the proposed model are discussed and the impacts of parameters on the decision variables are finally investigated. Numerical examples demonstrate the profitability of the developed two-level supply chain with backorder.