Supply Chain Coordination Under Demand Uncertainty Using Credit Option

S. Kamal Chaharsooghi () and Jafar Heydari ()
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S. Kamal Chaharsooghi: Tarbiat Modares University
Jafar Heydari: Shiraz University of Technology

A chapter in Supply Chain Coordination under Uncertainty, 2011, pp 403-425 from Springer

Abstract: Abstract In this chapter, a coordination scheme based on the credit option for the simultaneous coordination of order quantity (Q) and reorder point (s) in a two-stage supply chain (SC) is developed. A decentralized SC including one buyer and one supplier is investigated. The buyer faces demand uncertainty and uses a continuous (s, Q) inventory model. It is shown that joint decision making for both s and Q is profitable for the whole SC. However, in centralized decision making the buyer always loses, whereas the supplier greatly profits. A credit option is proposed as a coordination scheme to encourage the buyer to accept the coordinated decisions. In the proposed model, the buyer can benefit from late payments that are subject to commitment to the jointly agreed s and Q. The lower and upper bounds for the credit period are calculated. The proposed scheme shares the benefits of coordinated decision making based on the bargaining power of each member. Numerical experiments showed that the proposed model can achieve channel coordination.

Keywords: Coordination; Credit option; Order quantity; Reorder point; Supply chain; Uncertainty (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:ihichp:978-3-642-19257-9_16

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DOI: 10.1007/978-3-642-19257-9_16

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