A joint economic lot-size model with collaboration of supply chain members

Abstract

Purpose The purpose of this study is to investigate a joint economic lot-size model with the possibility of cofinancing between members of a three-echelon supply chain (SC) including one supplier, one manufacture and one retailer. Given the differences in credit as well as differences in access to capital markets, SC members will be able to create a financial alliance to maximize the profits of each member. This study proposed a model to maximize the annuity stream of the SC by considering the financial interaction between SC members. Design/methodology/approach This joint economic lot-sizing problem was described and modeled mathematically. To evaluate the mathematical model, different scenarios were considered with (and without) the possibility of financial interaction. Findings It is suggested that, in addition to the goods and information flow among SC members, proper financial flow can also have an impact on the improvement of SC performance. Originality/value While previous studies consider cofinancing between members of a two-echelon SC, this paper considers a three-echelon SC including one supplier, one manufacturer and one retailer where financial cooperation between different levels of the SC in both upstream and reverse directions will be possible.