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Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain

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  • Wang, Qinan
  • Chay, Yiowmin
  • Wu, Zhang

Abstract

We consider a decentralized supply chain, whereby a supplier sells a product to a group of independent buyers, and develop a strategy for the supplier to offer an all-units price discount or cash rebate for orders that are synchronized with its replenishments. As synchronized orders can be met with inventory directly from receiving to shipping without warehousing, the proposed strategy streamlines system inventory flows to minimize inventory and, hence, the related costs. On the other hand, by increasing the replenishment interval of the supplier, the proposed strategy is able to induce buyers to order in large quantities and hence achieve the objectives of quantity discounts. We show that the proposed strategy can achieve nearly optimal (minimum) system cost, and is much more effective than the existing coordination strategies for decentralized supply chains in the literature.

Suggested Citation

  • Wang, Qinan & Chay, Yiowmin & Wu, Zhang, 2011. "Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 132(2), pages 230-239, August.
    • Handle: RePEc:eee:proeco:v:132:y:2011:i:2:p:230-239
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    2. Ata Allah Taleizadeh & Alireza Mahmoudzade Varzi & Alireza Amjadian & Mahsa Noori-daryan & Ioannis Konstantaras, 2023. "How cash-back strategy affect sale rate under refund and customers’ credit," Operational Research, Springer, vol. 23(1), pages 1-69, March.
    3. Lifeng Mu & Xin Tang & Vijayan Sugumaran & Wei Xu & Xiangyang Sun, 2023. "Optimal rebate strategy for an online retailer with a cashback platform: commission-driven or marketing-based?," Electronic Commerce Research, Springer, vol. 23(1), pages 475-510, March.
    4. Zhou, Yong-Wu & Cao, Bin & Tang, Qinshen & Zhou, Wenhui, 2017. "Pricing and rebate strategies for an e-shop with a cashback website," European Journal of Operational Research, Elsevier, vol. 262(1), pages 108-122.

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