Three echelon buyer--supplier delivery policy—a supply chain collaboration approach

Abstract

Several studies have both qualitatively and quantitatively addressed the ‘buyer–supplier’ relationship; however, most of them have emphasized the two-echelon system. This study focuses specifically on the decisions of economic order quantity, shipment sizes, and number of shipments made under a three-echelon supply chain among manufacturer, distribution centre (DC), and retailer. The authors develop a two-integrated model (TIM) and, accordingly, we focus on the linkage of the two integrated models in the supply chain. From the results of this study, it is found that while the retailer becomes the focal company in the supply chain, the DC's loss tend to be the largest. However, if all parties in a supply chain agree to collaborate, and follow the joint optimal shipment size, the total relevant cost within the supply chain can be significantly reduced compared with typical delivery policy.