Researches On Supply Chain Coordination Mechanism With Variable Production Cost

The studied content is come from National Natural Science Foundation Project (grant number: 70471045).Supply Chain Management refers to the activity and procedure of planning, coordinating, controlling and optimizing aiming to the whole supply chain system. With the global economic speeds up, the supply chain management becomes a competition scheme for enterprise, considering the dependence between them grows and the customer's demand personalized. Therefore, the end for supply chain management lies in how to cooperate the activities of the players in the chain through effective stimulation. While, supply chain coordination is designed to maximize the overall supply chain profits, i.e achieving perfect coordination by means of contracts and related stimulating mechanism. Up to now, most researchers established their study on an ideal hypothesis that disregards, such as the manufacture power is infinite, and the cost of products is fixed. So this paper discussed the supply chain coordination mechanism with variable production cost.In this paper, production cost is treated as a function of the finite production rate which is a decision variable. Studied coordination problem of how the producer being a leader uses volume discount mechanism to entice the retailer cooperating so as to improve the supply chain performance for a two-echelon supply chain system consisting of one producer and one retailer.This paper focus on three different demands: deterministic demand, linear-price demand and the demand with disruption. Provided is the quantity discount which maximizes the producer's profit and realizes the perfect coordination of the supply chain system. And the theoretical analysis and numerical examples show this discount model is very effective in improving the coordination of the supply chain and the profits of two parties.