Modelling and analysis of coordination of a three-level supply chain with use of price discount along with delay in payment

Abstract

Coordination improves the performance of a supply chain system. Two popular coordination mechanisms are 'price discount' and 'delay in payment'. The effect of these two mechanisms individually on supply chain performance has already been reported in literature. In this work, the two mechanisms 'price discount' and 'delay in payment' are used simultaneously to coordinate a three-level supply chain system. The problem has been modelled mathematically and solved. The result obtained in the case is compared with that obtained when using 'price discount' alone. It is seen that use of 'price discount' along with 'delay in payment' enhances the supply chain profit significantly compared to the case of price discounts alone.