Analysis of coordination and profit sharing with trade credit in supply chain

Abstract

This paper considers a supply chain consisting of a supplier and a retailer. When the supplier offers the trade credit to the retailer, their target profit will change and supply chain's profit will increase due to coordination. We develop a coordination mechanism through trade credit that both of the parties can divide the additional profit or the total profit equitably for two cases, case 1: no pre-decided individual target profit for the two members; case2: with pre-decided target profit for the two members. The inventory model of trade credit in supply chain is developed, and the order quantity and the credit period for coordinating supply chain is educed, and the effect of the model for sharing the profit and supply chain's coordination is analyzed. Finally the results were analyzed by conducting numerical examples.