Inventory Policies for Deteriorating Items with Maximum Lifetime under Downstream Partial Trade Credits to Credit-Risk Customers by Discounted Cash Flow Analysis

Getting loans from banks are almost impossible after 2008 global financial crisis. As a result, about 80% of companies in the United Kingdom and the United States offer their products on various short terms, free-interest loans to customers. To compute the interest earned and charged during the credit period but not to the revenue and other costs which are considerably larger than the interest earned and charged, numerous researchers and academicians apply merely the discounted cash flow (DCF) analysis. In addition, some products deteriorate continuously and cannot sell after expiration date. However, a little number of researchers have considered the product lifetime expectance into their models. In this chapter, a supplier-retailer-customer chain model is developed. The supplier provides an upstream full trade credit to the retailer, and the credit-risk customer gets a downstream partial trade credit from the retailer. The non-decreasing deterioration rate is 100% near particularly close to its expiration date. To compute all relevant costs, DCF analysis is applied. The retailer’s optimal replenishment cycle time is not only exists but also unique that demonstrated in this proposal and that has been shown by the numerical examples