Supply chain coordination with stock-dependent demand rate and credit incentives

Shuai Yang, Ki Sung Hong, Chulung Lee

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

In this paper, we consider a supply chain which consists of a single manufacturer and a single retailer with a single product type. Demand is assumed to be dependent on the retailer's stock level. Without coordination, the retailer determines its order quantity to maximize its own profit, which is usually smaller than the manufacturer's economic production quantity. Three coordination policies are presented to coordinate the manufacturer's and the retailer's decisions. First, the credit period policy and the quantity discount policy are developed and the total profits under the two policies are compared. Then we develop a centralized supply chain policy and show that there is a unique optimal order quantity to achieve a perfect coordination. The centralized supply chain can get higher or equal channel profit while the credit period policy and the quantity discount policy are easier to achieve. Numerical examples are provided to illustrate the proposed policies.

Original languageEnglish
Pages (from-to)105-111
Number of pages7
JournalInternational Journal of Production Economics
Volume157
Issue number1
DOIs
Publication statusPublished - 2014 Jan 1

Keywords

  • Coordination
  • Credit period
  • Quantity discount
  • Stock-dependent demand
  • Supply chain

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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