Synchronisation of order cycles of multiple buyers in a supply chain with trade credit policy

Abstract

In this paper, we propose a coordinated single-vendor multi-buyer supply chain model by synchronising ordering and production cycles with trade credit option. The synchronisation is achieved by scheduling the ordering cycle of buyers and coordinating them with the vendor's production cycle. Such a policy results in lower total cost of the system very often at the expense of increased costs of the buyers. Hence, in order to compensate the increased cost of the buyers, a credit option scheme is proposed which can guarantee that the costs of all the buyers and the vendor, as a result of coordination, will be reduced when compared with independent optimisation. A profit-sharing scheme is also developed. A mathematical model is developed and an effective-and-efficient heuristics is proposed for our proposed coordination model. Numerical results are provided with results showing that the Pareto improvements can be achieved via the proposed trade credit incentive scheme. Such results are irrespective of the capital cost structure of the vendor and buyers in the supply chain.