Simultaneous coordination of review period and order-up-to-level in a manufacturer-retailer chain

Abstract

In this article, manufacturer-retailer supply chain coordination (SCC) has been developed under periodic review inventory system. In the studied model, the retailer as downstream member uses periodic review inventory policy and decides about review period (T) and order-up-to-level (R). Also, the manufacturer as upstream member faces EPQ system and determines the number of shipments from manufacturer to retailer per production run (n) as a decision variable. Firstly, the problem is investigated in decentralized and centralized models and accordingly, in order to coordinate the mentioned supply chain, a coordination scheme based on quantity discount is proposed. Maximum and minimum discounts, which are acceptable for both members, are determined. Numerical examples and sensitivity analysis indicate that the proposed coordination scheme improves the profitability and performance of both members and entire SC toward decentralized model. Moreover, the developed coordination model can share extra profit between SC members according to their bargaining power fairly.