A co‐ordination model combining incentive scheme and co‐ordination policy for a single‐vendor–multi‐buyer supply chain

A co‐ordination model combining incentive scheme and co‐ordination policy for a single‐vendor–multi‐buyer supply chain

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Article ID: iaor201110539
Volume: 135
Issue: 1
Start Page Number: 136
End Page Number: 143
Publication Date: Jan 2012
Journal: International Journal of Production Economics
Authors: ,
Keywords: production, inventory, simulation: applications
Abstract:

Incentive scheme and co‐ordination policy are substantial components for the co‐ordination of a decentralized supply chain system, but there is little work combining the two components as a single decision model (). This paper proposes a model which incorporates both incentive and co‐ordination issues into a single co‐ordination model for a single‐vendor multi‐buyer supply chain. In the proposed model, the co‐ordination is achieved by synchronizing ordering and production cycles while price discount, which is based on the buyers’ order intervals, is used as the incentive to motivate buyers to participate in the co‐ordination. While the vendor is benefited from the co‐ordination by synchronized cycles, the proposed price discount scheme can guarantee that a buyer’s total relevant cost of co‐ordination will be reduced when compared with independent optimization. More importantly, the proposed price discount scheme does not require any cost information from the buyers.

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