Coordination of a three-level supply chain (supplier–manufacturer–retailer) with permissible delay in payments

Abstract Different trade credits can be used to coordinate a supply chain. One of the well-known mechanisms that is widely used in practice is the permissible delay in payments. This paper proposes models for coordinating a three-level (supplier–manufacturer–retailer) supply chain with permissible delay in payments, with its length (time to settle a payment) being a decision variable. It investigates the permissible delay among the three players, where the supplier offers a delay in payment to the manufacturer and the manufacturer offers another one to the retailer. The paper investigates nine different scenarios of permissible delay among the three players. A simulation study was performed and a thorough analysis of the results was used to identify the limitations of all scenarios and to draw some managerial insights and findings.

[1]  Suresh Kumar Goyal,et al.  An integrated inventory model for a single supplier-single customer problem , 1977 .

[2]  Kun-Jen Chung.  Comments on the EOQ model under retailer partial trade credit policy in the supply chain , 2008 .

[3]  J. Teng.  Optimal ordering policies for a retailer who offers distinct trade credits to its good and bad credit customers , 2009 .

[4]  S. Goyal.  “A JOINT ECONOMIC‐LOT‐SIZE MODEL FOR PURCHASER AND VENDOR”: A COMMENT* , 1988 .

[5]  Simone Zanoni,et al.  A note on an industrial strategy for stock management in supply chains: modelling and performance evaluation , 2004 .

[6]  Robert W. Grubbström,et al.  The EOQ with backlogging derived without derivatives , 1999 .

[7]  R. Hill.  The single-vendor single-buyer integrated production-inventory model with a generalised policy , 1997 .

[8]  C. Glock.  The joint economic lot size problem: A review , 2012 .

[9]  R. Higgins,et al.  Inventory Policy and Trade Credit Financing , 1973 .

[10]  Suresh Kumar Goyal,et al.  A one-vendor multi-buyer integrated inventory model: A comment , 1995 .

[11]  Mohamad Y. Jaber,et al.  Coordinating a two-level supply chain with delay in payments and profit sharing , 2006, Comput. Ind. Eng..

[12]  Powell E. Robinson,et al.  Flow Coordination and Information Sharing in Supply Chains: Review, Implications, and Directions for Future Research , 2002, Decis. Sci..

[13]  S. Aggarwal,et al.  Ordering Policies of Deteriorating Items under Permissible Delay in Payments , 1995 .

[14]  Diwakar Gupta,et al.  A Stochastic Inventory Model with Trade Credit , 2009, Manuf. Serv. Oper. Manag..

[15]  Ralf W. Seifert,et al.  A review of trade credit literature: Opportunities for research in operations , 2013, Eur. J. Oper. Res..

[16]  Z. Balkhi.  OPTIMAL ECONOMIC ORDERING POLICY WITH DETERIORATING ITEMS UNDER DIFFERENT SUPPLIER TRADE CREDITS FOR FINITE HORIZON CASE , 2011 .

[17]  S. Goyal.  Economic Order Quantity under Conditions of Permissible Delay in Payments , 1985 .

[18]  Jinn-Tsair Teng,et al.  Inventory lot-Size Models under Trade Credits: a Review , 2008, Asia Pac. J. Oper. Res..

[19]  Salem M. Aljazzar,et al.  Coordination of a two-level supply chain (manufacturer–retailer) with permissible delay in payments , 2016 .

[20]  Jianwen Luo,et al.  Buyer–vendor inventory coordination with credit period incentives , 2007 .

[21]  Napsiah Ismail,et al.  An EPQ Inventory Model with Allowable Shortages for Deteriorating Items under Trade Credit Policy , 2014 .

[22]  C. Jaggi,et al.  A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive , 2003 .

[23]  Kenneth Njoroge,et al.  The Implicit Costs of Trade Credit Borrowing by Large Firms , 2013 .

[24]  S. Viswanathan,et al.  Coordinating supply chain inventories through common replenishment epochs , 2001, Eur. J. Oper. Res..

[25]  S. Zolfaghari,et al.  Quantitative Models for Centralised Supply Chain Coordination , 2008 .

[26]  Hau L. Lee,et al.  The bullwhip effect in supply chains , 2015, IEEE Engineering Management Review.

[27]  Lu Lu.  A one-vendor multi-buyer integrated inventory model , 1995 .

[28]  Mohamad Y. Jaber,et al.  Coordinating a three-level supply chain with delay in payments and a discounted interest rate , 2014, Comput. Ind. Eng..

[29]  Napsiah Ismail,et al.  Reviewing the Literature of Inventory Models under Trade Credit Contact , 2014 .

[30]  Mohamad Y. Jaber,et al.  Lot sizing with permissible delay in payments and entropy cost , 2007, Comput. Ind. Eng..

[31]  Kun-Jen Chung,et al.  THE OPTIMAL ORDERING POLICY IN A DCF ANALYSIS FOR DETERIORATING ITEMS WHEN TRADE CREDIT DEPENDS ON THE ORDER QUANTITY , 2006 .

[32]  S. Seuring,et al.  Sustainable supply chain management and inter-organizational resources: a literature review , 2009 .

[33]  Mohamad Y. Jaber,et al.  A joint model for cash and inventory management for a retailer under delay in payments , 2013, Comput. Ind. Eng..

[34]  Eric Sucky,et al.  The bullwhip effect in supply chains—An overestimated problem? , 2009 .

[35]  M. Jaber,et al.  Coordinating a three-level supply chain with learning-based continuous improvement , 2010 .

[36]  Liang-Hsuan Chen,et al.  Integrated vendor-buyer cooperative inventory models with variant permissible delay in payments , 2007, Eur. J. Oper. Res..

[37]  Jim Freeman,et al.  Inventory Control and Management , 1992 .