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Coordinating a three-level supply chain with price discounts, price dependent demand, and profit sharing

Author

Listed:
  • Mohamad Y. Jaber
  • Ibrahim H. Osman
  • Alfred L. Guiffrida

Abstract

This paper proposes a three-level (supplier-manufacturer-retailer) supply chain model with a profit sharing mechanism to maximise the supply chain profit. In this model, an all-unit price discounts scheme is used to coordinate the order quantities among the supply chain levels, and the demand at the retailer's end is assumed to be price dependent. To enhance the coordination in the supply chain, two profit-sharing scenarios are investigated. The semi-liberal scenario is based on increasing the quantity discount in order to generate more demands with which the most powerful player in the chain will get the highest fraction of additional profits. However, a strict mechanism is suggested to rectify the first scenario by dividing the coordination profits based on equal return on investments. Computational results are provided under different patterns of the players' order or set-up costs along the chain. Furthermore, the results show that the strict mechanism is the best mechanism for profit sharing among the players in the supply chain.

Suggested Citation

  • Mohamad Y. Jaber & Ibrahim H. Osman & Alfred L. Guiffrida, 2006. "Coordinating a three-level supply chain with price discounts, price dependent demand, and profit sharing," International Journal of Integrated Supply Management, Inderscience Enterprises Ltd, vol. 2(1/2), pages 28-48.
    • Handle: RePEc:ids:ijisma:v:2:y:2006:i:1/2:p:28-48
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    Citations

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    Cited by:

    1. Panda, S. & Modak, N.M. & Basu, M. & Goyal, S.K., 2015. "Channel coordination and profit distribution in a social responsible three-layer supply chain," International Journal of Production Economics, Elsevier, vol. 168(C), pages 224-233.
    2. Ding, Huiping & Guo, Baochun & Liu, Zhishuo, 2011. "Information sharing and profit allotment based on supply chain cooperation," International Journal of Production Economics, Elsevier, vol. 133(1), pages 70-79, September.
    3. Ventura, José A. & Bunn, Kevin A. & Venegas, Bárbara B. & Duan, Lisha, 2021. "A coordination mechanism for supplier selection and order quantity allocation with price-sensitive demand and finite production rates," International Journal of Production Economics, Elsevier, vol. 233(C).
    4. Hosseini-Motlagh, Seyyed-Mahdi & Nematollahi, Mohammadreza & Johari, Maryam & Sarker, Bhaba R., 2018. "A collaborative model for coordination of monopolistic manufacturer's promotional efforts and competing duopolistic retailers' trade credits," International Journal of Production Economics, Elsevier, vol. 204(C), pages 108-122.
    5. Jaber, Mohamad Y. & Bonney, Maurice & Guiffrida, Alfred L., 2010. "Coordinating a three-level supply chain with learning-based continuous improvement," International Journal of Production Economics, Elsevier, vol. 127(1), pages 27-38, September.
    6. Ma, Xueli & Wang, Jian & Bai, Qingguo & Wang, Shuyun, 2020. "Optimization of a three-echelon cold chain considering freshness-keeping efforts under cap-and-trade regulation in Industry 4.0," International Journal of Production Economics, Elsevier, vol. 220(C).
    7. Jaber, M.Y. & Goyal, S.K., 2008. "Coordinating a three-level supply chain with multiple suppliers, a vendor and multiple buyers," International Journal of Production Economics, Elsevier, vol. 116(1), pages 95-103, November.
    8. Chan, Chi Kin & Fang, Fei & Langevin, André, 2018. "Single-vendor multi-buyer supply chain coordination with stochastic demand," International Journal of Production Economics, Elsevier, vol. 206(C), pages 110-133.
    9. Cheng, Rong & Duan, Yongrui & Zhang, Jianguang & Ke, Hua, 2021. "Impacts of store-brand introduction on a multiple-echelon supply chain," European Journal of Operational Research, Elsevier, vol. 292(2), pages 652-662.
    10. Wu, Chengfeng & Liu, Xin & Li, Annan, 2021. "A loss-averse retailer–supplier supply chain model under trade credit in a supplier-Stackelberg game," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 182(C), pages 353-365.
    11. Zanoni, Simone & Jaber, Mohamad Y. & Zavanella, Lucio E., 2012. "Vendor managed inventory (VMI) with consignment considering learning and forgetting effects," International Journal of Production Economics, Elsevier, vol. 140(2), pages 721-730.

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