Integrated vendor buyers system with quantity-discount and identical replenishment cycle time policy

Abstract

Due to the ease in scheduling, it is common for a large-scale supply chain network to have identical replenishment cycle time. We address an optimal pricing and replenishing policy in a system for a single vendor and multiple buyers with identical replenishment cycle time. Since it benefits the vendor more than the buyers when a vendor and multiple buyers are integrated, a quantity-discount pricing strategy is incorporated to entice the buyers to order larger lot sizes so that the minimum total cost can be derived. Negotiation factor is used to balance the cost saving between the players. A numerical example is provided with sensitivity analysis to demonstrate the theory and the cost savings. The quantity-discount incentive is a win–win strategy between the vendor and the buyers.