Coordination of a single-manufacturer/multi-buyer supply chain with credit option

One of the important issues in supply chain management is the coordination between manufacturers and multi-buyer. A single manufacturer supplying a product to single buyer is hard to find in today's business environment. This paper investigates a coordination problem in a single-manufacturer and multiple heterogeneous buyers situation. Two typical cases are explored here: (i) ex-site delivery case considering manufacturer dominance where manufacturer with larger production lot size delivers the item to the group of heterogeneous buyers at common replenishment time through common carrier and (ii) ex-factory delivery case with buyer's dominance and common replenishment time for delivery. The paper develops coordination mechanism that allows improvement of supply chain performance. Acceptance of a coordinated solution depends on the share of surplus generated due to coordination between the parties of the supply chain. The paper also focuses on how negotiation can be carried out to get due share of extra savings after coordination from the business by each party. (C) 2007 Elsevier B.V. All rights reserved.