Coordinating a three-level supply chain with quantity discounts

Coordinating a three-level supply chain with quantity discounts

0.00 Avg rating0 Votes
Article ID: iaor20022190
Country: United States
Volume: 33
Issue: 5
Start Page Number: 371
End Page Number: 384
Publication Date: May 2001
Journal: IIE Transactions
Authors: ,
Keywords: supply, planning
Abstract:

Numerous examples exist that illustrate how companies enjoying a strong position in a supply chain unilaterally dictate terms to their suppliers and/or their customers. This paper suggests a mechanism by which a company can coordinate its purchasing and production functions and create an integrated plan that dictates order and production quantities throughout a three-firm channel. Specifically, we model a company that attempts to dictate channel lot sizes by obtaining a quantity discount from its supplier while offering perhaps a different one to its customer. Previous quantity discount research has examined supply chains consisting of only two levels, a seller and a buyer. This paper considers a three-level chain (supplier–manufacturer–retailer) and explores the benefits of using quantity discounts on both ends of the supply chain to decrease costs. We show that incorporating quantity discounts into both ends of the supply chain can significantly decrease costs compared to concentrating only on the lower end. Furthermore, the results of the decentralized procedure described here are robust vis-à-vis a centralized decision-making procedure.

Reviews

Required fields are marked *. Your email address will not be published.