The Effect of Accounts Payable Method for Sales Promotion in the Supplier-retailer Supply Chain

This paper considers a supplier-retailer supply chain, in which each player acts to maximize each own profit. In order to increase the profit of the entire supply chain, the supplier provides the retailer with an accounts payable method as a trade credit policy, and requires the retailer to provide the consumer with a sales price discount policy to increase customer demand. This paper first introduces the EOQ model reflecting the accounts payable method, and then analyzes the effects of accounts payable for sales promotion using the newly developed EOQ model. In the process, this paper develops profit models for the supplier, retailer, and the entire system with and without accounts payable. For the four scenarios, the paper analyzes the scenario models using the Stackelberg game. Through numerical experiments, the paper reveals some implications: (1) Accounts payable for sales promotion can improve the performance of the supplier-retailer supply chain; (2) If the retailer is acting as a Stackelberg leader, the supplier is in a better position to reap the benefits of accounts payable, while if the supplier is acting as a Stackelberg leader, the retailer is in a better position to reap the benefits of accounts payable; (3) In terms of performance, the vertically integrated model outperforms the independent model.