Handbook of EOQ Inventory Problems pp 201-220 | Cite as

# Coordinating a Supply Chain with an EOQ Model

## Abstract

In this paper, we consider a supply chain coordination scheme and issues in which a manufacturer supplies a product to a retailer. The retailer decides his optimal order quantity using an economic order quantity (EOQ) model which takes into consideration the shipment costs charged by the manufacturer. We show that under some circumstances, the manufacturer can offer a contract which includes a discount shipment fee per delivery and a shipment fee per unit to coordinate the supply chain and enhance the profits of both the manufacturer and the retailer. We also identify under which condition the manufacturer cannot coordinate the supply chain with shipment fees. This research highlights that the manufacturer needs to further investigate these conditions before offering and implementing a contract. Numerical examples are also included to illustrate the main results discussed in the paper.

## Keywords

EOQ model Supply chain coordination## Notes

### Acknowledgments

The authors gratefully acknowledge two anonymous referees whose comments improved this paper, and financial support from the Natural Sciences and Engineering Research Council of Canada.

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