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This study investigates the joint replenishment and delivery problem taking trade credits the delay in payment permitted by suppliers and capacity-constrained into consideration (CJRD-TC). The CJRD-TC aims to minimize the total system costs by finding a reasonable replenishment and delivery schedule policy. In this paper, an opposite-based RUNge Kutta optimization algorithm (OBRUN) is proposed to compare with other intelligent algorithms, including the differential evolution (DE), RUNge Kutta optimization algorithm (RUN), sine cosine algorithm (SCA), and adaptive differential evolution with optimal external archive (JADE). The proposed algorithm is tested on 14 optimization functions. The values of average, standard deviation, and the best are the lowest for 12 functions, which demonstrates OBRUN is superior to other algorithms. We also provide graphs of search history, 2D views of functions, trajectory curve, average fitness history, and convergence curve of OBRUN, the balance between exploration and exploitation over the course of iterations can be observed. The convergence curves of five algorithms are also depicted, which show OBRUN has a fast convergence rate and accuracy than other algorithms. We conduct numerical experiments, parameter tuning, and sensitivity analysis for each of the small-scale, medium-scale, and large-scale number of items. The OBRUN can always find better solutions with the lowest mean values and the best-found total cost results than other algorithms. Indicators of the average optimality gap and the optimality gap dominate by the value of zero. These computational results have demonstrated OBRUN is a suitable and effective candidate for managers to solve the practical CJRD-TC problems. [ABSTRACT FROM AUTHOR]

Our model indicates that European firms across all size categories use trade credits to purchase 6%–15% of tangible fixed assets and 14%–30% of intangible assets in the short-run. A long-run target adjustment model shows that large firms eventually replace most of this temporary trade credit financing with cheaper sources of funds. However, even in the long-run, small firms finance 4%–6% of tangible fixed asset purchases and 5%–10% of intangible fixed asset purchases using trade credit. Since smaller firms do not have the same access to bank credit as larger firms, trade credit is used to fund long-term investments Trade credit is therefore a key component in the capital structure decisions of smaller firms and it should be included in their weighted-average cost of capital calculations.

Trade credit strategies – comprised of the approaches used by internationalising firms to set the payment terms and schedules for their customers – are one of the few levers available to new small firms to overcome the liability of outsidership. They are vital to entrepreneurial firms seeking to achieve international market growth in the context of scarce resources and limited knowledge of foreign markets and partners. Though under-explored and under-theorised to-date, trade credits may unlock material insights for predictive models of entrepreneurial growth. As such, our study develops and tests the notion that trade credits constitute an important mechanism for entrepreneurial firms to initiate goodwill and generate valuable referrals. However, our findings also suggest that while riskier trade credit strategies help first-time exporters combat exclusion from networks key to a firm's ability to internationalise, the attendant risks often have a detrimental impact on long-term profitability and survival, thus creating a decision-making conundrum for growth-aspirants. Drawing upon a sample of 88,000 export transactions by 1040 small lumber firms from 52 countries, we advance theory and practice by showing how trade credit strategies shape both growth and performance. [ABSTRACT FROM AUTHOR]

Despite the importance of trade credit as a source of financing, there is a significant and persistent decline in this form of short-term borrowing and lending over the 1979 to 2018 interval. The median firm's accounts receivable decreased by 52% while accounts payable ratio fell by 47%. The decline is systematic, as it is present in most industries and sub-samples of firms classified on different characteristics. Further, firms' trade credit ratios are significantly less than predicted ratios based on firm-specific characteristics and industry factors, and this deficiency, which is pervasive, becomes more negative over time. However, changes in macroeconomic factors such as financial shocks, interest rates, changes in monetary policy and corporate tax rates, credit available in the economy, and the transition from manufacturing to technology-oriented economy, explain the deficiency as well as the time pattern. [ABSTRACT FROM AUTHOR]

In this study, we employ system dynamics to study the combined effect of extended payment terms and a buyer's supply risk management practices on two outcomes: the supplier's bankruptcy risk and the buyer's financial bottom line. In conjunction with payment terms, we model the impact of two commonly recommended supply chain risk management (SCRM) practices: quick response to supply disruptions and use of a secondary (backup) source. Among other results, we uncover a feedback mechanism that contributes to the negative effect of extended payment terms on a supplier's finances and show that longer payment terms can worsen buyer outcomes, especially when the supplier faces a higher risk of disruptions. We also show that, when considered alongside extended payment terms, common SCRM practices may not always be beneficial for buyer firms. Our research suggests decisions related to SCRM and extended payment terms should not be made independently. [ABSTRACT FROM AUTHOR]

It is a widespread financial practice in procurement management for a supplier aiming to attract customers to offer trade credits when customers make inquiries about the sold products. In this paper, we examine the joint replenishment problem considering trade credits (JRP-TC) under the power-of-two (PoT) policy. We formulate a mathematical model and conduct an analysis that reveals insights into the properties of the optimal objective function. From there, we propose an effective search algorithm that obtains the global optimal solution for the JRP-TC under the PoT policy. Our complexity analysis shows that the JRP-TC and the conventional joint replenishment problem under the PoT policy are pseudo-polynomial time solvable. [ABSTRACT FROM AUTHOR]

This paper studies the effects of bank credit availability, trade credit and the capital cost on inventory decisions. There are two competing theories on the effect of bank credit lines on investments. While one (Lins et al. 2010) suggests that the primary role played by undrawn credit is to finance new opportunities, the other (Acharya et al. 2014) suggests that undrawn credit serves primarily as a bank monitored liquidity insurance. We attempt to resolve these two conflict views in the context of inventory investments. Using empirical data, we show that the primary role of undrawn credit depends on the individual firm's financial status. When a firm is financially constrained, its inventory decisions are linked to the additional bank credit available to the firm—echoing the insurance nature of bank credits. On the other hand, when a firm is financially healthy, two other inventory financing factors play more significant roles than undrawn credits. For financially healthy firms, inventory investments are significantly negatively related to the financial cost of inventory and positively related to the credit offered by suppliers. Additionally, we study the financial crisis of 2007–2008 as a systematic shock in the credit market to identify the effects of a firm's financial credits. We show that during the financial crisis, the inventory turnover and working capital levels of US retailers were related to the availability of bank credit. However, immediately after the crisis, the evidence demonstrates the positive relationship between firms' inventory level and the trade credit they are offered. [ABSTRACT FROM AUTHOR]

In this paper, an EOQ model is developed for a deteriorating item with quadratic time dependent demand rate under trade credit. Mathematical models are also derived under two different situations i.e. Case I; the credit period is less than the cycle time for settling the account and Case II; the credit period is greater than or equal to the cycle time for settling the account. The numerical examples are also given to validate the proposed model. Sensitivity analysis is given to study the effect of various parameters on ordering policy and optimal total profit. Mathematica 7.1 software is used for finding optimal numerical solutions.

Our model indicates that European firms across all size categories use trade credits to purchase 6%-15% of tangible fixed assets and 14%-30% of intangible assets in the short-run. A long-run target adjustment model shows that large firms eventually replace most of this temporary trade credit financing with cheaper sources of funds. However, even in the long-run, small firms finance 4%-6% of tangible fixed asset purchases and 5%-10% of intangible fixed asset purchases using trade credit. Since smaller firms do not have the same access to bank credit as larger firms, trade credit is used to fund long-term investments Trade credit is therefore a key component in the capital structure decisions of smaller firms and it should be included in their weighted-average cost of capital calculations., Competing Interests: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (© 2023 The Authors. Published by Elsevier Ltd.)

Abstract: This paper investigates the impact of US Export‐Import Bank (EXIM) on US exports particularly in the wake of international competition from foreign national export credit agencies (ECAs). We employ a gravity framework on a country‐industry‐year‐level panel data set that matches EXIM authorisations with US bilateral exports. Our results depict the general ineffectiveness of the Bank in promoting exports within and across industries. Some heterogeneities behind the general finding are also uncovered: industries other than aerospace parts and products are more likely to benefit from EXIM authorisations, and EXIM authorisations to larger businesses seem to be more effective in encouraging exports. Furthermore, we find no evidence that EXIM encourages US exports by offsetting foreign ECA competition. These results are neither affected by competing countries’ membership to the OECD Arrangement nor by the size of American firms that received EXIM support. Our results cast doubt on the ubiquitously positive claims made by the Bank and its supporters, yet also provide policy lessons for countries that are either in the inception stages of establishing their own ECAs or are now placing greater importance on ECA financing in encouraging exports. [ABSTRACT FROM AUTHOR]

Non-instantaneously deteriorating products retain their quality for a certain period before beginning to deteriorate. Retailers commonly adjust their retail prices when products shift from a non-deteriorating state to a deteriorating state in order to stimulate demand. It is essential to consider this price adjustment for inventory models of non-instantaneously deteriorating products under trade credit, due to the fact that the calculation of earned interest is based on the retail price. This paper considers the problem of ordering non-instantaneously deteriorating products under price adjustment and trade credit. Our objective was to determine the optimal replenishment cycle time while minimizing total costs. The problem is formulated as three piecewise nonlinear functions, which are solved through optimization. Numerical simulation is used to illustrate the solution procedures and discuss how system parameters influence inventory decisions and total cost. We also show that a policy of price adjustment is superior to that of fixed pricing with regard to profit maximization. [ABSTRACT FROM AUTHOR]

In this study, EOQ model is developed for a deteriorating item with quadratic time dependent demand rate under trade credit. Mathematical models are also derived under two different situations i.e. Case I; the credit period is less than the cycle time for settling the account and Case II; the credit period is greater than or equal to the cycle time for settling the account. The numerical examples are also given to validate the proposed model. Sensitivity analysis is given to study the effect of various parameters on ordering policy and optimal total profit. Mathematica 7.1 software is used to find optimal numerical solutions. [ABSTRACT FROM AUTHOR]

Internationally active firms rely intensively on trade credits even though they are considered particularly expensive. This phenomenon has been little explored so far. Our analysis focusses on cash-in-advance financing. With the help of a theoretical model, we show that firms intensively use cash-in-advance because it serves as a quality signal that reduces the high uncertainty related to international transactions. Specifically, cash-in-advance provided from a foreign buyer to an exporter can alleviate adverse selection and the risk of moral hazard. Thus, exporting becomes more profitable which allows less productive firms to start exporting. We use unique survey data on German enterprises from the Business Environment and Enterprise Performance Survey to test the effect of cash-in-advance financing on firms' exporting participation. Accounting for endogeneity, we find that cash-in-advance has a positive impact on the firms' probability to export. Moreover, our results suggest that this effect is particularly strong for less productive firms. [ABSTRACT FROM AUTHOR]

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Abstract: During the growth stage of a product life cycle especially for high-tech products, the demand function increases with time. In this paper, we extend the constant demand to a linear non-decreasing demand function of time and incorporate a permissible delay in payment under two levels of trade credit into the model. The supplier offers a permissible delay linked to order quantity, and the retailer also provides a downstream trade credit period to its customers. The objective is to find the optimal replenishment cycle that minimizes the retailer’s annual total relevant cost per unit time. The condition for an optimal solution to the generalized model is presented and some fundamental theoretical results are established. Finally, numerical examples to illustrate the proposed model are provided. Sensitivity analysis is performed and some relevant managerial insights are obtained. [Copyright &y& Elsevier]

Most researchers studied vendor–buyer supply chain inventory policies only from the perspective of an integrated model, which provides us the best cooperative solution. However, in reality, not many vendors and buyers are wholly integrated. Hence, it is necessary to study the optimal policies not only under an integrated environment but also under a non-cooperative environment. In this article, we develop a supply chain vendor–buyer inventory model with trade credit financing linked to order quantity. We then study the optimal policies for both the vendor and the buyer under a non-cooperative environment first, and then under a cooperative integrated situation. Further, we provide some numerical examples to illustrate the theoretical results, compare the differences between these two distinct solutions, and obtain some managerial insights. For example, in a cooperative environment, to reduce the total cost for both parties, the vendor should either provide a simple permissible delay without order quantity restriction or offer a long permissible delay linked order quantity. By contrast, in a non-cooperative environment, the vendor should provide a short permissible delay to reduce its total cost. [ABSTRACT FROM PUBLISHER]

Cardenas-Barron [Cardenas-Barron, L.E. (2010) ‘A Simple Method to Compute Economic order Quantities: Some Observations’, Applied Mathematical Modelling, 34, 1684–1688] indicates that there are several functions in which the arithmetic–geometric mean method (AGM) does not give the minimum. This article presents another situation to reveal that the AGM inequality to locate the optimal solution may be invalid for Teng, Chen, and Goyal [Teng, J.T., Chen, J., and Goyal S.K. (2009), ‘A Comprehensive Note on: An Inventory Model under Two Levels of Trade Credit and Limited Storage Space Derived without Derivatives’, Applied Mathematical Modelling, 33, 4388–4396], Teng and Goyal [Teng, J.T., and Goyal S.K. (2009), ‘Comment on ‘Optimal Inventory Replenishment Policy for the EPQ Model under Trade Credit Derived without Derivatives’, International Journal of Systems Science, 40, 1095–1098] and Hsieh, Chang, Weng, and Dye [Hsieh, T.P., Chang, H.J., Weng, M.W., and Dye, C.Y. (2008), ‘A Simple Approach to an Integrated Single-vendor Single-buyer Inventory System with Shortage’, Production Planning and Control, 19, 601–604]. So, the main purpose of this article is to adopt the calculus approach not only to overcome shortcomings of the arithmetic–geometric mean method of Teng et al. (2009), Teng and Goyal (2009) and Hsieh et al. (2008), but also to develop the complete solution procedures for them. [ABSTRACT FROM AUTHOR]

In practice, a supplier often offers its retailers a permissible delay period M to settle their unpaid accounts. Likewise, a retailer in turn offers another trade credit period N to its customers. The benefits of trade credit are not only to attract new buyers who consider it a type of price reduction, but also to provide a competitive strategy other than introduce permanent price reductions. On the other hand, the policy of granting credit terms adds an additional cost to the seller as well as an additional dimension of default risk. In this paper, we first incorporate the fact that trade credit has a positive impact on demand but negative impacts on costs and default risks to establish an economic order quantity model for the seller in a supply chain with up-stream and down-stream trade credits. Then we derive the necessary and sufficient conditions to obtain the optimal replenishment time and credit period for the seller. Finally, we use some numerical examples to illustrate the theoretical results. [ABSTRACT FROM AUTHOR]

This study investigates the trade credit channel of monetary policy transmission in Turkey by using a large panel of corporate firms and includes detailed information on balance sheets and income statements of firms that regularly reported to the Central Bank of the Republic of Turkey during the period 1996-2008. The study suggests that the composition of external finance differs considerably across firm types based on size and export performance under tight and loose financial conditions. Small and medium-size manufacturing firms and firms with a low export share are less likely to have access to bank finance, especially in tight periods. In addition, financially constrained firms with limited access to bank finance (small, low-export-share firms) tend to substitute trade credits for bank loans more aggressively in tight periods as monetary policy tightens. The large volume of trade credit on firms' balance sheets and its positive response to contractionary monetary shocks imply that the trade credit channel might subdue the traditional credit channel of monetary transmission. [ABSTRACT FROM AUTHOR]

Abstract: In 2006, Huang proposed an inventory model with two warehouses when the supplier offers the retailer a permissible delay of M periods, and the retailer also provides its customers a permissible delay of N periods. He then solved it without derivatives. In this note, we extend his model to complement the shortcomings of his model. In contrast to the complicated and tedious quadratic–algebraic method suggested by Huang, we propose a simple arithmetic–geometric method to solve the inventory problem. Finally, we run computer programs for several numerical examples to illustrate the proposed model and obtain some managerial implications. [Copyright &y& Elsevier]

In this article, we complement the shortcoming of the inventory economic production quantity (EPQ) model developed by Huang and Huang (2008), 'Optimal Inventory Replenishment Policy for the EPQ Model Under Trade Credit Derived Without Derivatives', International Journal of Systems Science, 39, 539-546), and propose an arithmetic-geometric inequality method to obtain the global optimal solution without taking complex differential calculus or using tedious algebraic manipulations. Finally, we provide an economical interpretation of the theoretical result so that the reader can understand the insight of the result. [ABSTRACT FROM AUTHOR]

Since the publication of the Goyal model in 1985, research on the modeling of inventory lot-size under trade credits has resulted in a body of literature. In this paper, we present a review of the advances in inventory literature under conditions of permissible delay in payments since 1985. We classify all related previous articles into five categories based on: (a) without deterioration, (b) with deterioration, (c) with allowable shortage, (d) linked to order quantity, and (e) with inflation. The motivations, extensions and weaknesses of various previous models have been discussed in brief to bring out pertinent information regarding model developments in the past two decades. [ABSTRACT FROM AUTHOR]

There is compelling evidence that the Japanese distribution system is changing. This study develops propositions regarding the expected changes in three price-related distribution practices. Data collected from 136 Japanese manufacturers and retailers in the men's apparel industry is used to describe the future direction and extent of change expected in these distribution practices. Results suggest significant changes in the system of rebates and manufacturers' suggested price but no significant change in the practice of extended trade credit. [ABSTRACT FROM PUBLISHER]