Mechanism Design for Coordination of Two-Echelon Supply Chain under Stochastic Demand

Subject Areas : Industrial Management

Morteza Taherifard ¹ , Ibrahim Taimurie ² , Marzie Ebrahimi ³ , Soghra Solimangoli ⁴

1 - M.S in industrial engineering, university of science and technology
2 - Assistant Professor of Industrial Engineering, Iran University of Science and Technology
3 - Academic Member of Sama Technical School, Islamic Azad University, Karaj Branch
4 - M.A in Mathematics, Sharif University, Tehran, Iran

Received: 2018-01-11 Accepted : 2018-01-11 Published : 2011-12-22

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Abstract :

This research examines coordinated decisions in a decentralized supply chain, consisting of one supplier and one retailer, which face random demand of a single product with a short life cycle. This paper considers a setting where the retailer has accurate demand information while the supplier does not. Such a problem with asymmetric demand information can be viewed as an extension of the newsboy problem in which both the supplier and the retailer possess the same demand information. Combining the mechanism of quantity discount and return policy will enable us to develop one coordinated model in contrast with the basic and uncoordinated model. Then, optimal order quantities of retailer and profits of the supply chain are calculated and compared in each model. Analytical and numerical results show that performance of the coordinated model is better than the basic and uncoordinated model. This article also shows that coordinated mechanism increases profits of the retailer, supplier, and total supply chain.