Pricing Optimization for Inventory with Integrated Storage and Credit Constraints

Price is a pivotal determinant of market demand, as higher prices typically reduce sales while lower prices stimulate them. Thus, incorporating price-dependent demand into inventory models is both realistic and necessary. In practice, limited storage capacity often forces retailers to rent additional space, motivating the adoption of two-warehouse systems. Trade credit also plays a critical role in supply chain management: suppliers may offer cash discounts or deferred payments to encourage larger orders, while retailers extend credit to customers to boost sales. To reduce default risk, however, retailers usually provide only partial credit. Considering the time value of money, costs and profits are assessed using discounted cash-flow analysis to account for payment delays and inflation. This study develops an integrated supplier–retailer–customer chain model that (1) incorporates price-dependent demand, (2) includes a rented warehouse for limited storage, (3) considers partial trade credit, (4) links two-level trade credit terms to order quantity, and (5) evaluates financial performance on a present-value basis. The model aims to maximize total profit by determining optimal price, replenishment cycle, and order quantity. Numerical and sensitivity analyses confirm that extending supplier credit can lower prices and improve overall profitability, offering useful insights for strategic inventory management.