An Optimal Decision Making Model for Supplier and Buyer's Win-Win Strategy in a Two Echelon Supply Chain

Abstract

Supply chain management (SCM) is becoming extremely important to achieve competitiveness in the current business environment. Moreover, supply chain partnership between suppliers and buyers in SCM have had a significant impact on supply chain performance. In this study, we develop a quantitative model based on the supply chain partnership under several assumptions. For this purpose, we first prove several basic theorems which verify the relationship between supplier and buyer's total profit for two cases, with and without supply chain partnership. We then prove that there exists the supplier's selling price per unit which makes the maximum total profits for both supplier and buyer with supply chain partnership greater than those for any given supplier's selling price per unit without supply chain partnership.