The Coordinator Role of Trade Credit Contract for Coordinating Integrated Pricing and Periodic Review Inventory Decisions With Stochastic Demand

Maryam Johari, Seyyed-Mahdi Hosseini-Motlagh and Mohammadreza Nematollahi ()
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Maryam Johari: School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran2University Road, Hengam Street, Resalat Square, Narmak, Tehran, Iran
Seyyed-Mahdi Hosseini-Motlagh: School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran2University Road, Hengam Street, Resalat Square, Narmak, Tehran, Iran
Mohammadreza Nematollahi: School of Management Sciences, Université du Québec à Montréal, 405 Rue Sainte-Catherine Est, Montréal, QC H2L 2C4, Canada

Asia-Pacific Journal of Operational Research (APJOR), 2021, vol. 38, issue 04, 1-54

Abstract: The purpose of this study is to analytically coordinate joint pricing and periodic review ordering choices for a supply chain (SC) facing stochastic price-dependent demand. In this paper, first, the optimal inventory and pricing strategies made by SC members are obtained under decentralized and centralized models. Thereafter, employing a trade credit contract, it proposes to provide a win–win coordination for the investigated SC. Sensitivity analyses are provided both analytically and numerically which indicate the significance of trade credit contracts in improving both customer service level and customer satisfaction. The results indicate that using trade credit contracts, the coordination of joint pricing and periodic review ordering choices is achievable. Moreover, the proposed trade credit contract has a unique feature in achieving more economic benefit compared to the centralized model under some circumstances. In addition, sensitivity analyses reveal that the coordination of integrated periodic review ordering and pricing choices is beneficial, especially for items with high price sensitivity and high demand uncertainty. Our findings also show the applicability of the trade credit contract for an SC facing highly uncertain demand.

Keywords: Supply chain coordination; trade credit contract; stochastic demand; pricing; periodic review inventory system (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S021759592050058X

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