Title: Channel coordination in a two-echelon supply chain with lead time reduction using a wholesale price scheme

Authors: Jafar Heydari; Elham Zakaryaie Kermani; Roya Tat; Elham Heydari

Addresses: School of Industrial Engineering, College of Engineering, University of Tehran, Iran ' Department of Industrial Engineering, University of Tehran, Farabi Campus, Iran ' School of Industrial Engineering, College of Engineering, University of Tehran, Iran ' Department of Industrial Engineering, University of Qom, Iran

Abstract: This paper develops the coordination of a two-echelon supply chain (SC) under lead time reduction strategies using a wholesale price contract as an incentive scheme. In the investigated model, the buyer defines the order quantity and the seller determines the replenishment policy and the lead time reduction strategy. Under the decentralised decision structure, both members' decision models are optimised where each party tends to maximise own profit. In the next step, the centralised decision model for the whole channel is studied where a single decision-maker optimises the entire SC profitability. The results show that under the decentralised decision model not only the channel profitability is lower, but also there is no effort for crashing lead times. Finally, a wholesale price coordination contract is developed to coordinate SC and convince both members to globally optimise their decisions. Our analysis indicates that the presented coordination policy leads to a win-win result for both members and at the same time reduces lead times.

Keywords: supply chain coordination; lead time reduction; wholesale price scheme.

DOI: 10.1504/IJPM.2020.111345

International Journal of Procurement Management, 2020 Vol.13 No.6, pp.756 - 774

Received: 13 Apr 2019
Accepted: 10 Jun 2019

Published online: 04 Nov 2020 *

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