Title: Coordinating inventory decisions in a two-echelon supply chain through the target sales rebate contract

Authors: Jafar Heydari; Javad Asl-Najafi

Addresses: School of Industrial Engineering, College of Engineering, University of Tehran, Iran ' School of Industrial Engineering, College of Engineering, University of Tehran, Iran

Abstract: In this paper, a model in the context of a decentralised two-echelon supply chain (SC) with a single supplier and a single retailer confronting an uncertain market demand is developed. The proposed model seeks to coordinate the decisions related to the retailer's order quantity that increases the profit of the decentralised SC as much as the centralised one. With regard to the considered SC features, sales rebate contract is applied and a new approach for determining the contract's parameters including sales target level and rebate amount is developed which is based on the retailer and supplier viewpoints. Furthermore, applicability of the proposed model is evaluated via some numerical examples and the results are analysed in depth. Finally, some sensitivity analyses are conducted on demand variations. The obtained results reveal that the proposed model has the capability of coordinating the order quantity in the investigated SC and also is able to handle the demand fluctuations effectively.

Keywords: supply chain coordination; newsvendor problem; decentralised decision making; target sales rebate; sales target level; rebate amount; inventory decisions; two-echelon supply chains; supply chain management; order quantity; demand fluctuations.

DOI: 10.1504/IJIR.2016.077454

International Journal of Inventory Research, 2016 Vol.3 No.1, pp.49 - 69

Received: 17 Mar 2016
Accepted: 31 Mar 2016

Published online: 30 Jun 2016 *

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