Article ID: | iaor20121171 |
Volume: | 62 |
Issue: | 1 |
Start Page Number: | 56 |
End Page Number: | 69 |
Publication Date: | Feb 2012 |
Journal: | Computers & Industrial Engineering |
Authors: | Arkan Ali, Hejazi Seyed Reza |
Keywords: | combinatorial optimization |
In this research, a coordination mechanism based on a credit period in a two echelon supply chain with one buyer and one supplier, is designed. The buyer is faced with uncertain demand by coping with normal distribution. Both lead time and ordering cost for receiving his order can be reduced at an added cost; in other words, they are controllable. The optimization models with and without integration are proposed. Then a way to coordinate orders in supply chain based on the credit period so that the total cost of supply chain would be minimized is designed. By using this mechanism we also discuss how the credit period is to be determined in order to achieve channel coordination and a win–win outcome. Finally, numerical examples are solved to illustrate the theoretical results and obtain the managerial insights.