Selective discount for supplierbuyer coordination using common replenishment epochs
A supplier may reduce its order costs by providing an incentive in the form of price discounts to buyers to restrict their replenishment intervals to multiples of a common replenishment epoch (CRE). This coordination mechanism was studied by Viswanathan and Piplani who suggested that the supplier offer a discount that is the maximum of the discount required by all buyers. We generalize their model to allow for a selective discount policy that, if beneficial, excludes some buyers to minimize the suppliers total cost. Using a computational study, we observe that offering discounts to buyers selectively, if necessary, by segmenting them and offering multiple CRE, reduces the suppliers cost in many scenarios.
coordination replenishment supply chain management inventory