Coordination of Production/ Order Policy for a Single Vendor Single Buyer chain with stochastic demand

Coordination is an important function in supply chain management (SCM) to provide better competitive capability of the chain. Coordination through vendor-buyer negotiation is an area which has received great research attention in particular in modern systems. In this study, a number of methods, including those based on price discount and cost minimization models have been suggested in the literature. Mathematical models developed to determine economic order/production lot size for a "single vendor single buyer" stochastic demand situation are proposed. These models consider both independent and joint decisions for chain member. Through considering price discounts it is suggested a vendor buyer coordination mechanism to reach the most appropriate decision. For this, a solution algorithm has been detailed in the paper. Numerical study is also provided to illustrate the effectiveness of the proposed method.