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

Abstract

This paper illustrates a channel coordination and quantity discounts between a vendor and a buyer with single-setup multi-delivery (SSMD) strategy to reduce the joint total cost among supply chain players. The benefit of the coordination between a buyer and a vendor is considered as the vendor requests to the buyer for changing the ordering quantity such that the 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 for additional savings by offering a quantity discount. The centralized decision making is examined for the effect of this strategy with the presence of backorder for buyer and inspection cost for the vendor. The quantity discount strategy, with the presence of variable backorder and inspections, can allow more savings for all players of supply chain. Some numerical examples, sensitivity analysis, and graphical representations are given to illustrate more savings from existing literature and comparisons between the several demand values.