Supply Chain Coordination with Variable Backorder, Inspections, and Discount Policy for Fixed Lifetime Products

Abstract EN

This paper illustrates a channel coordination and quantity discounts between a vendor and a buyerwith single-setup multi-delivery (SSMD) strategy to reduce the joint total costamong supply chain players.

The benefit of the coordination between a buyer and a vendor isconsidered as the vendor requests to the buyer for changing the ordering quantity such thatthe vendor can be benefited from lower inventory costs.

After accepting the buyer’s condition,the vendor compensates the buyer for his increased inventory cost and gives consent foradditional savings by offering a quantity discount.

The centralized decision making is examinedfor the effect of this strategy with the presence of backorder for buyer and inspection costfor the vendor.

The quantity discount strategy, with the presence of variable backorder andinspections, can allow more savings for all players of supply chain.

Some numerical examples,sensitivity analysis, and graphical representations are given to illustrate more savings fromexisting literature and comparisons between the several demand values.