Title: A surcharge pricing scheme for coordinating the supply chain of deteriorating products under the JIT environment

Authors: Jafar Razmi; Amin Aslani; Saman Hassanzadeh Amin

Addresses: School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, 11155-4563, Iran ' School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, 11155-4563, Iran ' Department of Mechanical and Industrial Engineering, Ryerson University, ON, M5B-2K3, Canada

Abstract: We investigate the coordination of a supply chain of deteriorating products under the JIT environment. Deteriorating products lose their quality over time, and their inventory and production models have specific characteristics, different from the classical models. JIT includes several shipments in small sizes from a supplier to a buyer. For the buyer, JIT results in a decrease in inventory holding costs. However, for the supplier, it causes an increase in the number of setups, which increases the total cost. Consequently, the supplier is reluctant to participate in the JIT system, unless his/her loss is compensated. We propose a surcharge pricing in which the buyer offers the supplier an additional increase in wholesale price, and in return, asks him/her to switch to the JIT system. Numerical analyses indicate that this scheme is capable of fully coordinating the SC. The proposed scheme also has positive environmental impacts which are investigated.

Keywords: deterioration; supply chain coordination; surcharge pricing; supply chain management; just-in-time; JIT.

DOI: 10.1504/IJBPSCM.2018.098307

International Journal of Business Performance and Supply Chain Modelling, 2018 Vol.10 No.2, pp.146 - 164

Received: 07 Mar 2018
Accepted: 15 Nov 2018
Published online: 13 Mar 2019 *

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