Coordinating Orders in Three-echelon Supply Chain using price adjustment mechanism

Supply chain coordination has become a critical success factor for supply chain management (SCM). In the past few years, the researchers have widely emphasized that cooperation among supply chain (SC) firms is a key source of competitive advantage. This paper is focused on supply chain coordination from the perspective of inventory management. Li and Liu [1] developed a model for illustrating how to use quantity discount policy by price adjustment mechanism to achieve supply chain coordination. We extend this mechanism to three echelon supply chain and consider variable lead time which has more &#10&#10representation of the real world situation. For this purpose, we will develop a model with benefit objective function for the problem. We will then analyze the model with and without coordination. By solving the proposed model, proper order quantities will be obtained. Finally, the advantages of the proposed mechanism will be explored and a surplus benefit dividing method will be designed.&#10