Title: Two-stage supply chain coordination through credit option in asymmetric information environment

Authors: S.P. Sarmah, D. Acharya, S.K. Goyal

Addresses: Department of Industrial Engineering and Management, IIT Kharagpur 721302, India. ' Department of Industrial Engineering and Management, IIT Kharagpur 721302, India. ' Department of Decision Sciences and MIS, Concordia University, Montreal, Canada

Abstract: Literature on integrated inventory models has shown that both buyer and manufacturer can be better off by adopting the joint optimum order quantity. However, the implementation of a joint optimal policy requires coordination and cooperation between the members of the supply chain. A critical assumption made throughout the integrated inventory models literature is that the manufacturer/supplier has complete information about the buyer|s cost structure. But in the actual supply chain, this assumption is seldom to be satisfied. In this paper, a model for coordination between the two independent members of the supply chain through credit option is developed when the firms are not willing to share cost related information including the desired profit target from the business. A procedure for negotiation is developed to divide the surplus generated due to coordination. Finally, the developed procedure is illustrated through a numerical example.

Keywords: supply chain coordination; credit option; inventory models; supply chain management; SCM; integrated inventory; negotiation procedures; information sharing.

DOI: 10.1504/IJLSM.2008.015930

International Journal of Logistics Systems and Management, 2008 Vol.4 No.1, pp.98 - 115

Published online: 02 Dec 2007 *

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