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Supply Chain Coordination Under Demand Uncertainty Using Credit Option

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Book cover Supply Chain Coordination under Uncertainty

Part of the book series: International Handbooks on Information Systems ((INFOSYS))

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Abstract

In this chapter, a coordination scheme based on the credit option for the simultaneous coordination of order quantity (Q) and reorder point (s) in a two-stage supply chain (SC) is developed. A decentralized SC including one buyer and one supplier is investigated. The buyer faces demand uncertainty and uses a continuous (s, Q) inventory model. It is shown that joint decision making for both s and Q is profitable for the whole SC. However, in centralized decision making the buyer always loses, whereas the supplier greatly profits. A credit option is proposed as a coordination scheme to encourage the buyer to accept the coordinated decisions. In the proposed model, the buyer can benefit from late payments that are subject to commitment to the jointly agreed s and Q. The lower and upper bounds for the credit period are calculated. The proposed scheme shares the benefits of coordinated decision making based on the bargaining power of each member. Numerical experiments showed that the proposed model can achieve channel coordination.

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Author information

Authors and Affiliations

  1. Industrial Engineering Department, Tarbiat Modares University, Tehran, Iran

    S. Kamal Chaharsooghi

  2. Industrial Engineering Department, Shiraz University of Technology, Shiraz, Iran

    Jafar Heydari

Authors
  1. S. Kamal Chaharsooghi
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  2. Jafar Heydari
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Corresponding author

Correspondence to Jafar Heydari .

Editor information

Editors and Affiliations

  1. , Business Division, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong SAR, Hong Kong/PR China

    Tsan-Ming Choi

  2. , Department of Logistics and Maritime Stu, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong SAR, Hong Kong/PR China

    T.C. Edwin Cheng

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Chaharsooghi, S.K., Heydari, J. (2011). Supply Chain Coordination Under Demand Uncertainty Using Credit Option. In: Choi, TM., Cheng, T. (eds) Supply Chain Coordination under Uncertainty. International Handbooks on Information Systems. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-19257-9_16

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