Supply chain coordination mechanism with time- based discounts and prepayment ratio for perishable products under budget constraint

Document Type : Original Article

Authors

Department of Industrial Engineering, Faculty of Engineering, College of Farabi, University of Tehran, Iran

Abstract

The supply chain of a product encompasses all organizations and companies involved in the processes of procurement, supply, production, distribution, and delivery of that product to the customer. One of the most critical aspects of supply chain management is the coordination among these elements. Perishable products, which are recognized as widely used items, hold a significant position in inventory control research because these items may deteriorate, evaporate, or degrade over time, leading to a loss of value or quantity. Therefore, determining the order quantity and timing for such products is crucial. Additionally, supply chain members often face budget constraints, and the manufacturer secures part of the required liquidity at the beginning of production by receiving a portion of the total order amount upfront. Determining this portion is also of great importance. In this study, a two-level supply chain, consisting of a wholesaler and a manufacturer producing a perishable product, has been examined. To foster long-term coordination and collaboration among members and to maximize supply chain profit, a discount mechanism has been utilized. This mechanism includes one discount based on order timing and another based on the prepayment ratio. Finally, a numerical example has been analyzed, and sensitivity analysis has been conducted on the problem's parameters. The results demonstrate that by implementing the coordination mechanism and determining the optimal values for order quantity, order timing, and prepayment ratio, the profit of both the members and the entire supply chain increases in the coordinated state compared to the uncoordinated state.

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