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@article{204257,
        author = {Somen Guha and Dhrub Kumar Singh},
        title = {A Deterministic Inventory Model with Credit Incentives: Optimal Retail Pricing, Ordering Cycles, and Profit Maximization},
        journal = {International Journal of Innovative Research in Technology},
        year = {2026},
        volume = {13},
        number = {1},
        pages = {1239-1244},
        issn = {2349-6002},
        url = {https://ijirt.org/article?manuscript=204257},
        abstract = {This paper develops a deterministic inventory model under a two-level trade credit financing system, where the supplier offers a credit period to the retailer, and the retailer, in turn, extends a credit period to customers. The model assumes a constant demand rate, no shortages, and negligible lead time, reflecting a realistic retail environment. The main objective is to determine the optimal retail price, ordering cycle, and order quantity that maximizes the retailer’s average profit per unit time.
Two major cases are analyzed based on the relationship between the supplier’s credit period and the retailer’s credit period. Mathematical formulations are developed to incorporate ordering cost, purchasing cost, holding cost, interest earned, and interest charged. The optimal solutions are obtained by solving the profit functions under different scenarios.
Numerical examples are provided to illustrate the applicability of the model and to validate the theoretical results. A detailed sensitivity analysis is also conducted to examine the effects of key parameters such as ordering cost, interest rates, and credit period on the optimal decisions. The results indicate that financial factors, especially interest earned and credit period, significantly influence profitability.
The study concludes that retailers can enhance profit by utilizing longer credit periods, earning higher interest, and adopting smaller and more frequent replenishment policies under favorable trade credit conditions. The model offers practical insights for decision-making in inventory management under modern credit-based business environments and can be extended to incorporate uncertain demand or deterioration in future research.},
        keywords = {Two-level trade credit, EOQ, Retail pricing, Optimal ordering cycle, Ordering policy.},
        month = {June},
        }