Evaluation of supply chain with quality improvement under trade credit and freight rate discount

In this article, we formulate a supply chain model with single vendor and single buyer considering quality improvement. We assume that the buyer purchases under trade credit linked to the order quantity offered by the supplier. In addition, the buyer pays the freight charge according to a weight schedule. Further, demand is assumed to be sensitive to the buyer’s selling price. Also the production cost of the supplier is assumed to be a convex function of the production rate. This paper attempts to offer a best policy that provides possible solutions for both the buyer and the vendor to collaboratively agree on inventory control. An algorithm is furnished to determine the optimal solution. In addition, a numerical example is presented to illustrate the theoretical approach and results. Sensitivity analysis with respect to the major parameters of the system is carried out. From the analysis we offer some managerial insights to achieve significant decrease in total cost.