Two-Stage Supply Chain
Coordination with Limited Information Sharing and Setup Costs
by
Selcuk Karabati
Koc University
College of Administrative Sciences and Economics
We address the coordination problem in a two-stage supply chain with limited
information sharing. The supply chain faces a constant deterministic demand
which is not price-sensitive, and operates with fixed setup costs in both
stages. We analyze the coordination problem under the assumption that the
supplier and the buyer share customer demand data only. We show that the
supplier can actually moderate a cost minimizing buyer to order in quantities
different than the buyer's optimal order quantity in the traditional setting,
and present a multi-break point quantity discount scheme that maximizes
supplier's expected net savings. The proposed multi-break point discount scheme
can be easily computed from available information while also allowing the buyer
to preserve some of its private information for future dealings. We present a
computational analysis of the performance of the discount scheme in terms of its
coordination efficiency and allocation of the net supply chain savings.