The allocation of cost savings is very important for the success of the joint relationship between the buyer and vendor in supply chain management. This paper develops integrated models with permissible delay in payments for determining the optimal replenishment time interval and replenishment frequency. In addition, the variant pricing strategy is employed to obtain both sides' cost savings in order to entice buyers to join long-term cooperative relationships. A simple solution algorithm is presented to allocate the cost savings in the integration model, and a numerical example is used to demonstrate the feasibility of the proposed integration models.
All Science Journal Classification (ASJC) codes
- Modelling and Simulation
- Applied Mathematics