IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v253y2016i1p14-24.html
   My bibliography  Save this article

A surcharge pricing scheme for supply chain coordination under JIT environment

Author

Listed:
  • Chakraborty, Abhishek
  • Chatterjee, Ashis K.

Abstract

Just-In-Time (JIT) system involves frequent shipments of smaller batch sizes from the supplier to the buyer. For the buyer, it results in the reduction of the inventory holding cost. However, it is often accompanied by an increase in the set up cost for the supplier. Thus, the supplier may be reluctant to switch to the JIT mode unless he is assured of some form of compensation. In this paper, we introduce a pricing scheme where the buyer offers the supplier an increase in the wholesale price, to encourage the supplier to switch to the JIT mode. Such a pricing scheme may be termed as a surcharge. We develop the economics of surcharge pricing as a supply chain coordinating mechanism under JIT environment. We also establish the equivalence of surcharge pricing with other common coordination mechanisms like Quantity Discount (QD) and Joint Economic Lot Sizing (JELS) model.

Suggested Citation

  • Chakraborty, Abhishek & Chatterjee, Ashis K., 2016. "A surcharge pricing scheme for supply chain coordination under JIT environment," European Journal of Operational Research, Elsevier, vol. 253(1), pages 14-24.
    • Handle: RePEc:eee:ejores:v:253:y:2016:i:1:p:14-24
    DOI: 10.1016/j.ejor.2016.02.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221716300200
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2016.02.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Martin Albrecht, 2010. "New Coordination Mechanisms," Lecture Notes in Economics and Mathematical Systems, in: Supply Chain Coordination Mechanisms, chapter 0, pages 129-154, Springer.
    2. Lu, Lu, 1995. "A one-vendor multi-buyer integrated inventory model," European Journal of Operational Research, Elsevier, vol. 81(2), pages 312-323, March.
    3. Sucky, Eric, 2005. "Inventory management in supply chains: A bargaining problem," International Journal of Production Economics, Elsevier, vol. 93(1), pages 253-262, January.
    4. James P. Monahan, 1984. "A Quantity Discount Pricing Model to Increase Vendor Profits," Management Science, INFORMS, vol. 30(6), pages 720-726, June.
    5. Charles J. Corbett & Deming Zhou & Christopher S. Tang, 2004. "Designing Supply Contracts: Contract Type and Information Asymmetry," Management Science, INFORMS, vol. 50(4), pages 550-559, April.
    6. Viswanathan, S. & Piplani, Rajesh, 2001. "Coordinating supply chain inventories through common replenishment epochs," European Journal of Operational Research, Elsevier, vol. 129(2), pages 277-286, March.
    7. Dudek, Gregor, 2004. "Collaborative planning in supply chains : a negotiation based approach," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20676, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    8. Darwish, M.A. & Odah, O.M., 2010. "Vendor managed inventory model for single-vendor multi-retailer supply chains," European Journal of Operational Research, Elsevier, vol. 204(3), pages 473-484, August.
    9. Kelle, Peter & Al-khateeb, Faisal & Anders Miller, Pam, 2003. "Partnership and negotiation support by joint optimal ordering/setup policies for JIT," International Journal of Production Economics, Elsevier, vol. 81(1), pages 431-441, January.
    10. Sarmah, S.P. & Acharya, D. & Goyal, S.K., 2006. "Buyer vendor coordination models in supply chain management," European Journal of Operational Research, Elsevier, vol. 175(1), pages 1-15, November.
    11. Corbett, Charles J. & DeCroix, Gregory A. & Ha, Albert Y., 2005. "Optimal shared-savings contracts in supply chains: Linear contracts and double moral hazard," European Journal of Operational Research, Elsevier, vol. 163(3), pages 653-667, June.
    12. Abhishek Chakraborty & A.K. Chatterjee & Arqum Mateen, 2015. "A vendor-managed inventory scheme as a supply chain coordination mechanism," International Journal of Production Research, Taylor & Francis Journals, vol. 53(1), pages 13-24, January.
    13. Goyal, Suresh K. & Gupta, Yash P., 1989. "Integrated inventory models: The buyer-vendor coordination," European Journal of Operational Research, Elsevier, vol. 41(3), pages 261-269, August.
    14. Sucky, Eric, 2006. "A bargaining model with asymmetric information for a single supplier-single buyer problem," European Journal of Operational Research, Elsevier, vol. 171(2), pages 516-535, June.
    15. Z. Kevin Weng, 1995. "Channel Coordination and Quantity Discounts," Management Science, INFORMS, vol. 41(9), pages 1509-1522, September.
    16. Hau L. Lee & Meir J. Rosenblatt, 1986. "A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits," Management Science, INFORMS, vol. 32(9), pages 1177-1185, September.
    17. Guido Voigt, 2011. "Supply Chain Coordination in Case of Asymmetric Information," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-642-20132-5, October.
    18. Martin Albrecht, 2010. "Supply Chain Planning and Coordination," Lecture Notes in Economics and Mathematical Systems, in: Supply Chain Coordination Mechanisms, chapter 0, pages 5-34, Springer.
    19. Benton, W. C. & Park, Seungwook, 1996. "A classification of literature on determining the lot size under quantity discounts," European Journal of Operational Research, Elsevier, vol. 92(2), pages 219-238, July.
    20. Charles J. Corbett & Xavier de Groote, 2000. "A Supplier's Optimal Quantity Discount Policy Under Asymmetric Information," Management Science, INFORMS, vol. 46(3), pages 444-450, March.
    21. Guido Voigt, 2011. "Supply Chain Coordination in Case of Asymmetric Information," Lecture Notes in Economics and Mathematical Systems, in: Supply Chain Coordination in Case of Asymmetric Information, chapter 0, pages 5-44, Springer.
    22. Martin Albrecht, 2010. "Coordination Mechanisms for Supply Chain Planning," Lecture Notes in Economics and Mathematical Systems, in: Supply Chain Coordination Mechanisms, chapter 0, pages 35-61, Springer.
    23. Martin Albrecht, 2010. "Supply Chain Coordination Mechanisms," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-642-02833-5, October.
    24. Esmaeili, M. & Aryanezhad, Mir-Bahador & Zeephongsekul, P., 2009. "A game theory approach in seller-buyer supply chain," European Journal of Operational Research, Elsevier, vol. 195(2), pages 442-448, June.
    25. Lau, Amy Hing Ling & Lau, Hon-Shiang & Wang, Jian-Cai, 2007. "Designing a quantity discount scheme for a newsvendor-type product with numerous heterogeneous retailers," European Journal of Operational Research, Elsevier, vol. 180(2), pages 585-600, July.
    26. repec:inm:ormnsc:v:30:y:1984:i:12:p:1524-1539(2 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matsui, Kenji, 2019. "A supply chain member should set its margin later if another member's cost is highly uncertain," European Journal of Operational Research, Elsevier, vol. 275(1), pages 127-138.
    2. Abhishek Chakraborty, 2021. "A surcharge pricing policy for supply chain coordination under the just-in-time (JIT) environment in the presence of backordering," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 1049-1076, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abhishek Chakraborty, 2021. "A surcharge pricing policy for supply chain coordination under the just-in-time (JIT) environment in the presence of backordering," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 1049-1076, December.
    2. Sarmah, S.P. & Acharya, D. & Goyal, S.K., 2006. "Buyer vendor coordination models in supply chain management," European Journal of Operational Research, Elsevier, vol. 175(1), pages 1-15, November.
    3. Esmaeili, M. & Zeephongsekul, P., 2010. "Seller-buyer models of supply chain management with an asymmetric information structure," International Journal of Production Economics, Elsevier, vol. 123(1), pages 146-154, January.
    4. Esmaeili, M. & Aryanezhad, Mir-Bahador & Zeephongsekul, P., 2009. "A game theory approach in seller-buyer supply chain," European Journal of Operational Research, Elsevier, vol. 195(2), pages 442-448, June.
    5. Venegas, Bárbara B. & Ventura, José A., 2018. "A two-stage supply chain coordination mechanism considering price sensitive demand and quantity discounts," European Journal of Operational Research, Elsevier, vol. 264(2), pages 524-533.
    6. Sucky, Eric, 2006. "A bargaining model with asymmetric information for a single supplier-single buyer problem," European Journal of Operational Research, Elsevier, vol. 171(2), pages 516-535, June.
    7. Zissis, Dimitris & Ioannou, George & Burnetas, Apostolos, 2015. "Supply chain coordination under discrete information asymmetries and quantity discounts," Omega, Elsevier, vol. 53(C), pages 21-29.
    8. Sarmah, S.P. & Acharya, D. & Goyal, S.K., 2007. "Coordination and profit sharing between a manufacturer and a buyer with target profit under credit option," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1469-1478, November.
    9. Duan, Lisha & Ventura, José A., 2019. "A Dynamic Supplier Selection and Inventory Management Model for a Serial Supply Chain with a Novel Supplier Price Break Scheme and Flexible Time Periods," European Journal of Operational Research, Elsevier, vol. 272(3), pages 979-998.
    10. Abdolkarim Sadrieh & Guido Voigt, 2017. "Strategic risk in supply chain contract design," Journal of Business Economics, Springer, vol. 87(1), pages 125-153, January.
    11. Salma Karray & Chirag Surti, 2016. "Channel coordination with quantity discounts and/or cooperative advertising," International Journal of Production Research, Taylor & Francis Journals, vol. 54(17), pages 5317-5335, September.
    12. Kerkkamp, R.B.O. & van den Heuvel, W. & Wagelmans, A.P.M., 2018. "Two-echelon supply chain coordination under information asymmetry with multiple types," Omega, Elsevier, vol. 76(C), pages 137-159.
    13. Chu, Chi-Leung & Leon, V. Jorge, 2008. "Single-vendor multi-buyer inventory coordination under private information," European Journal of Operational Research, Elsevier, vol. 191(2), pages 485-503, December.
    14. Geunes, Joseph & Romeijn, H. Edwin & van den Heuvel, Wilco, 2016. "Improving the efficiency of decentralized supply chains with fixed ordering costs," European Journal of Operational Research, Elsevier, vol. 252(3), pages 815-828.
    15. Qinan Wang & Ruifang Wang, 2005. "Quantity discount pricing policies for heterogeneous retailers with price sensitive demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 52(7), pages 645-658, October.
    16. Jaber, M.Y. & Goyal, S.K., 2008. "Coordinating a three-level supply chain with multiple suppliers, a vendor and multiple buyers," International Journal of Production Economics, Elsevier, vol. 116(1), pages 95-103, November.
    17. Shin, Hojung & Benton, W.C., 2007. "A quantity discount approach to supply chain coordination," European Journal of Operational Research, Elsevier, vol. 180(2), pages 601-616, July.
    18. Lau, Amy Hing Ling & Lau, Hon-Shiang & Zhou, Yong-Wu, 2008. "Quantity discount and handling-charge reduction schemes for a manufacturer supplying numerous heterogeneous retailers," International Journal of Production Economics, Elsevier, vol. 113(1), pages 425-445, May.
    19. Qinan Wang, 2004. "Coordinating independent buyers with integer‐ratio time coordination and quantity discounts," Naval Research Logistics (NRL), John Wiley & Sons, vol. 51(3), pages 316-331, April.
    20. Nihat Altintas & Feryal Erhun & Sridhar Tayur, 2008. "Quantity Discounts Under Demand Uncertainty," Management Science, INFORMS, vol. 54(4), pages 777-792, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:253:y:2016:i:1:p:14-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.