Three-stage supply chain coordination under production capacity bottleneck environment

In this paper, we have analysed coordination issues in a three stage supply chain consisting of a retailer, a manufacturer having limited production capacity and a supplier who supplies raw materials to the manufacturer in a deterministic situation. In the development of the model, manufacturer is considered as the channel leader. The mathematical model is developed considering setup time of the manufacturer as bottleneck for the entire supply chain. When setup time constraint becomes active, we have derived the conditions for the supplier to coordinate in the channel. Further, the relationship between setup time and utilisation rate for optimum savings of the manufacturer is derived in the coordinated channel when constraint becomes active and it is shown that they are inversely related.