Mathematical modeling study demonstrates cost-minimizing inventory strategies in two-echelon supply chains, indicating that hybrid trade credit improves liquidity during pandemic disruptions.
The COVID-19 pandemic has affected all sectors of the world’s economy and society. Firms need to have disaster recovery and business sustainability plans and to be able to generate profits in order to develop. Trade credit may be a good way for firms to free up cash flow and finance short-term growth. Extensions of payment will provide firms with low-cost loans under the COVID-19 credit guarantee scheme. Implementation of hybrid trade credit activities has been shown to improve the financial crisis of many firms, and the effects are particularly evident within two-echelon supply chains. An economic order quantity (EOQ) model is derived under conditions of deteriorating items, an upstream full trade credit or cash discount, and downstream partial trade credit in a supply chain. A computer program is developed to provide a numerical solution and a numerical example is used to show the solution’s form and verify that the solution gives the minimum total cost per unit time.
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Ruan et al. (2022) studied this question.
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