Two-echelon supply chain coordination mechanism based on just-in-time purchase

For a supply chain with just-in-time purchasing, supply chain management focuses on setting up the suitable coordination mechanism that allows partners to achieve profit sharing and trust each other. Considering a just-in-time setting in which supplier delivery on time but the delivery quantity is uncertain, the necessity of coordination mechanism is analyzed through absolute independent decision compared with joint optimal decision, then an incentive function consisting of penalty cost and bonus is introduced and a coordination model is set up based on three incentive ways by order quantity, penalty cost and bonus. Focus is on the study of a coordination mechanism that allows a supply chain to achieve the optimal performance through the producer's fixing the penalty cost and the bonus with the determined order quantity. Finally simulation analysis is done.