Benefit sharing in inter‐organizational coordination

Abstract

PurposeTo develop an EOQ based model to quantify the benefit accrue due to coordination for the one supplier and n retailer supply chain system and concept to share the benefits derived from coordination.Design/methodology/approachAn intensive literature review has been done in the area of supply chain coordination covering both marketing and operational perspective. The analysis of literature has shown that models to quantify the benefits for supply chains consisting of a single supplier who supplies a product to multiple heterogeneous buyers are very limited. To fill this critical research gap the benefit sharing mechanism is derived based on optimal order quantity of the supply chain system.FindingsThis paper demonstrates the benefits of coordination to the supply chain system in terms of cost saving and generating the surplus money. It also suggests a way to find the range of prices to facilitated coordination. Under the developed pricing policy, no partner after coordination had to bear a loss. So in that sense we can say that the benefits of coordination are distributed to all the partners.Practical implicationsThe proposed model for benefit sharing protects the interest of all supply chain partners and hence will be profitable to all. The pricing scheme suggested will motivate retailers to increase ordering quantity per order, thereby reducing the joint ordering and holding costs.Originality/valueThe paper is unique in terms of quantifying and sharing the benefits of coordination for one supplier – multi heterogeneous buyer supply chain system.