The Effects of Coordination Mechanism on Vendor Buyer System of a Supply Chain

Abstract

In this study, a supply chain consists of vendor and buyer, where the vendor and buyer are two distinct independent logistic organizations have been investigated. Supply chain management has the difficulties for the disconnected and independent economic individuals. Further, rapid technological changes and high competitiveness make supply chain more complex. Various companies have realized the potential for achieving a competitive advantage through effectively coordinating different logistics members in the supply chain. In this research, it is assumed that vendor and buyer are coordinated by sharing their status. Further, it is assumed the coordination mechanisms that can align their objectives and coordinate their activities by sharing the information between vendor and buyer. This plays an important role in decision making in order to mitigate the current challenges and to increase the system performance and individual profitability of the supply chain. The coordinated mechanism among the members of supply chain has been proposed to achieve the optimal solution. This study formulates mixed integer linear fractional programming models that maximize the ratio of return on investment. Numerical example with the sensitivity of different parameters has been deployed to validate the models. Results show that by coordination, the individual profit over and above joint profit could be increased and consumers purchasing price could be decreased.