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.