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Supply chain coordination with stock-dependent demand rate and credit incentives

Author

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  • Yang, Shuai
  • Hong, Ki-sung
  • Lee, Chulung

Abstract

In this paper, we consider a supply chain which consists of a single manufacturer and a single retailer with a single product type. Demand is assumed to be dependent on the retailer's stock level. Without coordination, the retailer determines its order quantity to maximize its own profit, which is usually smaller than the manufacturer's economic production quantity. Three coordination policies are presented to coordinate the manufacturer's and the retailer's decisions. First, the credit period policy and the quantity discount policy are developed and the total profits under the two policies are compared. Then we develop a centralized supply chain policy and show that there is a unique optimal order quantity to achieve a perfect coordination. The centralized supply chain can get higher or equal channel profit while the credit period policy and the quantity discount policy are easier to achieve. Numerical examples are provided to illustrate the proposed policies.

Suggested Citation

  • Yang, Shuai & Hong, Ki-sung & Lee, Chulung, 2014. "Supply chain coordination with stock-dependent demand rate and credit incentives," International Journal of Production Economics, Elsevier, vol. 157(C), pages 105-111.
    • Handle: RePEc:eee:proeco:v:157:y:2014:i:c:p:105-111
    DOI: 10.1016/j.ijpe.2013.06.014
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    References listed on IDEAS

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    Cited by:

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    2. Tianwen Chen & Ronghu Zhou & Changqing Liu & Xiang Xu, 2023. "Research on Coordination in a Dual-Channel Green Supply Chain under Live Streaming Mode," Sustainability, MDPI, vol. 15(1), pages 1-23, January.
    3. Zhang, Li-Hao & Zhang, Cheng, 2022. "Manufacturer encroachment with capital-constrained competitive retailers," European Journal of Operational Research, Elsevier, vol. 296(3), pages 1067-1083.
    4. Yang, Honglin & Zhuo, Wenyan & Shao, Lusheng, 2017. "Equilibrium evolution in a two-echelon supply chain with financially constrained retailers: The impact of equity financing," International Journal of Production Economics, Elsevier, vol. 185(C), pages 139-149.
    5. Mohammad Reza Gholamian & Mahdi Ebrahimzadeh-Afruzi, 2021. "Credit and discount incentive options for two-level supply chain coordination, under uncertain price-dependent demand," Operational Research, Springer, vol. 21(4), pages 2283-2307, December.
    6. Hong Cheng & Yingsheng Su & Jinjiang Yan & Xianyu Wang & Mingyang Li, 2019. "The Incentive Model in Supply Chain with Trade Credit and Default Risk," Complexity, Hindawi, vol. 2019, pages 1-11, May.
    7. Tsao, Yu-Chung, 2019. "Coordinating contracts under default risk control-based trade credit," International Journal of Production Economics, Elsevier, vol. 212(C), pages 168-175.
    8. Saha, S. & Goyal, S.K., 2015. "Supply chain coordination contracts with inventory level and retail price dependent demand," International Journal of Production Economics, Elsevier, vol. 161(C), pages 140-152.
    9. Pan Liu & Shu-ping Yi, 2018. "A study on supply chain investment decision-making and coordination in the Big Data environment," Annals of Operations Research, Springer, vol. 270(1), pages 235-253, November.
    10. Qinglong Gou & Liang Liang & Zhimin Huang & Susan X. Li, 2017. "Editor’s Introduction," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 899-905, July.
    11. Mu, Xiuqing & Kang, Kai & Zhang, Jing, 2022. "Dual-channel supply chain coordination considering credit sales competition," Applied Mathematics and Computation, Elsevier, vol. 434(C).

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