Quantity discount coordination for allocation of purchase orders in supply chains with multiple suppliers

Studies about supply chain coordination have emphasised maximising the profit of the overall supply chain, but the profit changes of individual members in the supply chain have often been overlooked. It has been shown that profit increment of the whole supply chain may not be beneficial for every individual member. Therefore, the use of quantity discounts to achieve the coordination of a supply chain is discussed in this article. A two-echelon selling system with a single buyer and multiple suppliers is considered to enhance profitability for both sides at the same time. An acceptable quantity discount condition for both the buyer and the suppliers to determine an appropriate order quantity allocation to produce more profits in the supply chain is proposed. Furthermore, the profit distribution between the buyer and each supplier is studied. Finally, the results of the numerical application show that the buyer should focus on managing the procurement costs to decrease the acquiring costs, and the suppliers should focus on the fixed costs of management to reduce the production costs in machine operations.