Research On Inventory Coordination Models For Perishable Products On Two-Stage Supply Chain

With the economic globalization, business is becoming increasingly international and market competition is much fiercer. The competition among enterprises has developed into competition based on the whole supply chains. However, as independent entities, members of supply chain prefer to maximize their own profits rather than consider the benefits of the whole supply chain. Therefore, it is necessary to establish certain effective and efficient coordination mechanisms to encourage the cooperation among members, and thus improving the overall performance of the supply chain.Normally, the supply can influence the retailer’s order quantity by providing such coordination mechanisms as quantity discount, return policy, revenue sharing, and permissible delay in payment. One of the basic implicit assumptions of most inventory models has been the infinite shelf life of products while in storage. That is, a product once in stock remains unchanged and fully usable for satisfying future demand. If the rate of deterioration or decay is low and negligible, its effect can be ignored. However, in many situations this effect plays a major role and its impact must be considered explicitly.Based on game theory, principle-agent model and optimal control theory, this paper analyzes the joint problems of coordination for perishable products with constant rate of deterioration on two-stage supply chain. Three models are established as follows: 1) Under the assumption of a lot-for-lot policy, an optimal order schedule is achieved with quantity discount provided by the supplier. 2) Allowed to replenish inventory under integer multiple of retailer’s order cycle rather than lot-for-lot, supplier adopts credit period incentive (permissible delay in payment) as coordination mechanism to minimize his yearly costs. 3) Under asymmetric information, optimal quantity discount contracts are derived from the supplier’s perspective. The author also compares the optimized contract models with symmetric information and asymmetric information.This paper gives several models of inventory coordination for perishable products on two-stage supply chain as well as the optimal solutions, providing the theoretic evidence and practical guideline for the future study on this issue.