Coordination between vendor and buyer considering trade credit and items of imperfect quality

Vendor–buyer models for trade credit issues in the existing literature always consider the items produced as perfect. However, a number of items in a lot may be of imperfect quality. This paper extends Chen and Kang's [2007. Integrated vendor–buyer cooperative models with variant permissible delay in payments. European Journal of Operational Research 183 (2), 658–673] study to develop integrated vendor–buyer models that consider a permissible delay in payment and imperfect quality to determine the optimal solutions of the buyer's order quantity and the frequency for each vendor's production run. To establish a cooperative relationship between the vendor and buyer for a win–win situation, a simple solution algorithm is presented to determine the cost saving of each side when the warranty cost per unit is increased. A numerical example is used to illustrate the results for the proposed models.