Simulation modelling and analysis of a network supply chain coordination using price discount along with delay in payment under lost sale and backorder

Abstract

Coordination among supply chain (SC) members is essential to enhance its overall performance. The effect of various coordination mechanisms on SC performance is an area of research interest. In this study, two mechanisms 'price discount' and 'delay in payment' are used separately and simultaneously to coordinate a network SC under a simulated business environment. Discrete event simulation modelling is used to study the performance of the network SC in this study. Lost sale and backorder are the two cases simulated as most business has one of these. The results show that coordination improves the performance of the SC compared to non-coordination case and the simultaneous use of 'price discount' along with 'delay in payment' further enhances the SC surplus significantly compared to the individual use of either price discount or delay in payment. The extent of improvement in performance in each case is also reported, since this is very relevant for the decision maker who compares the effort to be taken and benefits that accrue before adopting a system. Sensitivity analysis has also been conducted.