Coordinating replenishment decisions in a two-stage supply chain by considering truckload limitation based on delay in payments

Improper setting of replenishment decisions can lead to lower service level and therefore reduces the whole supply chain (SC) profitability. In a decentralised SC, each member has the full authority of setting its own replenishment decisions, while these decisions affect the other SC members. In this paper, a single-upstream and single-downstream SC is considered, in which the upstream by proposing an incentive scheme based on delay in payments convinces the buyer to globally optimise his/her reorder point and also order quantity. Demand and also lead times are assumed uncertain in the investigated model. In addition, a truckload limitation is considered in downstream side. The proposed model ensures the global optimum of replenishment decisions under some circumstances. The model has the ability of sharing benefits between members to guarantee their participation. Maximum and minimum acceptable delay-in-payments durations are extracted. The results of numerical experiments show that the model has the ability of coordinating SC in most of the realistic parameter sets. Condition under which the proposed model is not able to coordinate the SC is also reported using a sensitivity analysis on the primary parameters. Extensive numerical experiments show capabilities of the proposed model in coordinating SC.