Trade Credit Term Decision and Coordination Mechanism in the Supply Chain

For a supply chain with one manufacture and one retailer,we compare the overall profits of a centralized supply chain with trade credit,and with direct loan.The pre-conditions that trade credit surpasses the direct loan,as well as the range of credit term are presented.To motivate the use of trade credit,a coordination mechanism with sales revenue and cost sharing is proposed.That is,the retailer shares the sales revenue with supplier,and at the same time,supplier shares the product inventory cost with the retailer.A numerical example is presented to illustrate the trade credit term decision and coordination mechanism.