Coordinating a Three-level Supply Chain with Financial Constraints

Supply chain coordination is extensively used as an effective tool for firms to stay competitive and improve their profitability. However, this solution may fail if the financial problems of the firms are ignored in the operations. To solve this challenge, we have proposed a coordination scheme using internal financing for a three-level supply chain facing some financial constraints. This case is modeled as a bi-objective optimization problem that optimizes both system’s costs and service level. We have solved the model using εconstraint method. The results show that the proposed coordination scheme can provide full service level (100%) to the customer, while the noncoordinated system cannot reach more than 50% of the service level. Furthermore, the system’s operational and financial costs are reduced by coordination.