Supply Chain Management is an integrative management philosophy to control the flow of materials in a harmonized way. In this context, inventory coordination is recognized as a key component for supply chain efficiency. A critical assumption made in the inventory coordination literature is that at least one of the supply chain participants has complete information or control over the supply chain without uncertainty. This is never true in practice. In most decentralized supply chains, the independent participants are willing to cooperate, yet ensure their own profitability at the same time.
The primary purpose of the dissertation is to develop a more operational inventory coordination mechanism (quantity discount based inventory coordination policy) by relaxing some of the assumptions made in the past. Simulation experiments along with three full factorial ANOVA's are designed to investigate the impact of (1) choice of supply chain inventory coordination policies, (2) magnitude of demand uncertainty, (3) buyer and supplier's inventory cost structure, and (4) buyer's economic Time-between-Orders on the performance of inventory coordination models. The performance of each model is measured by relative efficacy scales representing 'buyer's cost reduction,' 'supplier's profit improvement,' and 'supply chain's system cost reduction.'
The outcome of the dissertation is promising. The analytical results and corresponding statistical analyses confirm that the quantity discount policies have practical properties as a supply chain inventory coordination mechanism. In particular, the new models presented in the dissertation allow the supplier to identify the discount amount, which alleviates the buyer's risk associated with stochastic demand and ensures that both buyer and supplier gain benefits simultaneously.
The dissertation contributes to the body of literature in the following manner. First, the dissertation will hopefully provide a more practical supply chain inventory coordination mechanism for supply chains. Second, the results justify the current practice of inventory coordination efforts using quantity discounts as the primary coordination mechanism. Moreover, since the dissertation studies a basic structure of supply chains, it has a potential to extend to inventory coordination studies with distribution or assembly supply network structure.