Although a smoothly running supply chain is ideal, the reality is to deal with imperfectness in transportations. This paper tries to propose a mathematical model for a supply chain under the effect of unexpected disruptions in transport. Supplier offers the retailer a trade credit period and the retailer in turn offers his customers a permissible delay period. The retailer offers his customers a credit period and he receives the revenue from to , where is the cycle time at the retailer. Under this situation, the three cases such as , , and are discussed. An EPQ-based model is established and retailer's optimal replenishment policy is obtained through mathematical theorems. Finally, numerical examples and sensitivity analysis are presented to felicitate the proposed model. 1. Introduction Much of the logistician’s planning and control effort is directed toward running an efficient operation under normal conditions. At the same time, global trades such as Wal-Mart, Home Depot, and Dollar General are facing the extraordinary circumstances (such as earth quake, mishandling in transport, shipping damage, and misplacing products) that may result a risk in delivery from a supplier to a retailer. The supply disruptions take the form of high-impact and low-probability contingencies which can threaten decision makers of a supply chain. Mathematical modeling helps decision makers to evaluate optimal ordering policies against an incredibly complex and dynamic set of risks and constraints. In the classical logistics models, it was assumed that the retailers and their customers must pay for the items as soon as the items are received. However, in practices, the supplier/retailer would allow a specified credit period (say 30 days) to their retailers/customers for payment without penalty to stimulate the demand of the consumable products. This credit term in financial management is denoted as “net 30.” Teng [1] illustrated the benefits of trade credit policy: (1) it attracts new customers who consider trade credit policy to be a type of price reduction, and (2) it should cause a reduction in sales outstanding, since some established customer will pay more promptly in order to take advantage of trade credit more frequently. This paper investigates a supply chain model in which the supplier is willing to provide the retailer a full trade credit period for payments and the retailer offers the full trade credit to his/her customer. This is called two-echelon (or two-level) trade credit financing. In practice, this two-level trade credit financing at a retailer is more
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