Coordination of two-echelon supply chains using wholesale price discount and credit option

This paper, studies the coordination of two-echelon supply chains using a credit (delayed) payment option and/or a wholesale price discount offer. We develop models for optimizing individual members', as well as supply chain's objectives. These models lead to the determination of the retail price and the order quantity for the buyer, as well as the production batch size, wholesale discount and/or the credit period offer for the supplier, under five different scenarios. Our analysis indicates the superiority of a coordinating policy that incorporates both a quantity discount, as well as a credit payment option. With equitable profit sharing, such a policy can be beneficial for both the parties towards increasing total supply chain profitability. (C) 2012 Elsevier B.V. All rights reserved.