Research On Supply Chain System Decision-making Based On Allowable Shortage And Credit Payment

With the development of people’s living concepts and standards, the batch products no longer meet the personalized requirements, so that products update more and more frequently. This trend exacerbates the uncertainty of market demand forecast, which causes shortages of some products easily. This phenomenon not only affects the enterprise’s reputation, but also brings tremendous loss of shortage. Therefore, supply chain management inventory has been widely used. However, supply chain management has some particularity. Each node enterprises in the supply chain only consider their own profit maximization when making decisions, but they ignore the optimal decisions of the whole supply chain system. In addition, researches on supply chain system decision-making do not consider the operation manners of capital-flow. While credit payment is an increasingly common way of capital operation in today’s business activities, and plays an active role to various entities as a “win-win” strategy. But credit payment strategy also brings financial risks to the vendors. Thus, the study of supply chain system decision-making under the conditions of allowable shortage and credit payment is particularly important.This paper is on the basis of inventory, game theory, operational research, calculus and other related knowledge, using the method of quantitative mainly and the combination of qualitative and quantitative. It expands the existing supply chain decision model based on the classical newsboy model, and compares strategies in decentralized decision-making and centralized decision-making, also in the coordination mechanism of sharing interests and costs. The results show that the decision strategy in the coordination mechanism can make supply chain system optimal. The main contents and results of this paper are as follows:First, considering the conditions of allowable shortages and credit payment, the supplier and manufacture respectively take their own maximum profits as objective functions. Then model of supply chain system decision is established in the decentralized decision-making. Finally, the validities of the model and algorithm are illustrated by an example and sensitivity analysis of the parameters are also presented.Secondly, the supplier and the manufacture take the maximum profit of the whole supply chain as objective function. The model of supply chain system decision-making is established in the centralized decision. Then comparing with the decision strategy in decentralized decision by an example, the result shows that the centralized decision-making strategy can maximizing profits of the supply chain system, and the profit of manufacture is also increasing. However, the supplier’s profit is declining. The supplier is unwilling to accept the decision strategy. So the centralized decision-making strategy is not feasible.Finally, the supplier and manufacture’s profit models are established in the coordination mechanism of sharing revenues and costs, and the cost-sharing coefficient and the range of revenue-sharing coefficient are calculated. The decision strategies also can be obtained respectively by an example. Otherwise, the decision strategy in the coordination mechanism is compared with the ones in decentralized decision and centralized decision. Finally, the result shows that the supplier and manufacture’s profits are both increasing under the coordination mechanism and optimize the entire supply chain system decision-making.