Retailers Optimal Procurement Strategies under Conditions of Permissible Delay in Payments

Credit purchase is one operation mode of logistics finance, and it has already been widely used in practice, but the theoretical research is still deficient. As credit purchase and logistics finance make great contribution to the successful business operation, these concepts get more and more attention in commercial field. Credit purchase mode brings great benefits to both suppliers and retailers. It helps retailers purchase more products with less capital, reduce the capital cost of stock, and satisfy more demand to improve the customer satisfaction. Meanwhile, the mode can help suppliers expand its sales scale, gain economic benefits, attract more customers, and form long-term cooperation relationship with their customers. A multi-period dynamic programming model is built to help form the strategies of retailers based on credit trades between suppliers and retailers in this paper. And the objective function of the model is to realize profit maximization. Based on the further analysis of the model, it is successful to find some good propositions and lemmas which make it accessible to the optimal solution. There are three decisions in every period constitute the solution of the model, including whether purchase on credit or not, whether repay the loan or not, and the inventory level after purchasing. To maximize the gross profit of several periods, it is necessary to pick out the optimal solution from several possible solutions. After finishing building the model, a numerical example is given to illustrate the model. This paper makes theory and practical contribution to retailers to establish an optimal purchase strategy.