Coordination of a two‐echelon supply chain in presence of market segmentation, credit payment, and quantity discount policies

Abstract

AbstractIn today's competitive business markets, a revenue optimization method is always one of the most crucial issues ahead of commercial supply chains so that it is utilized by the managers to improve their profitability. On the other hand, enhancing coordination and collaboration between the chains’ members has taken a vital role in increasing their efficiency and profitability. Thus, managers tend to employ/design marketing and coordinating incentive mechanisms using the revenue optimization method, as the most influential tools, to motivate the purchasers to order more and subsequently increase their market share. Here, this issue is studied in a two‐echelon supply chain by designing incentive contracts in order to evaluate the profit of organizations and enterprises and assess the best contract, which causes the highest profit, as the main goal of the businesses. In this study, a pricing‐inventory model is developed for a single‐item two‐echelon supply chain consisting of a manufacturer and a retailer in the presence of three different scenarios. In the first scenario, a credit payment (delay‐in‐payment) contract is considered between the chain members. In the second scenario, we studied a market segmentation policy in which the market demand is divided into price and quality oriented customers’ demand while a quantity discount contract is assumed as the third one. The profit of supply chain under these new conditions is computed by some numerical examples and then the effects of cost parameters on the decision variables and the profit are analyzed.