Investigation of a consignment stock and a traditional inventory policy in a three-level supply chain system with multiple-suppliers and multiple-buyers

This paper develops and investigates four coordination scenarios for a three-level supply chain system consisting of multiple suppliers, a vendor, and multiple buyers. One scenario considers consignment stock (CS) agreements between the adjacent levels (suppliers-vendor; vendor-buyers) in the supply chain. Another one considers traditional coordination policies (TP). The two remaining scenarios are combinations of the two; i.e., CS-TP and TP-CS. The scenarios also consider trade credit where an upstream player offers a delay-in-payment to a downstream player. A scheme of equal-sized payments at equal intervals is adopted. Numerical examples are provided to compare between the scenarios and to study the effects of different cases of delay-in-payments on the total profit of the system. A sensitivity analysis is performed to test the effects of varying some parameters on the system's profit. The results showed that a combined coordination policy and paying post the due date return the highest system profit. The differences in the profits for the four scenarios were found to be insignificant under some conditions. This finding may give managers the flexibility to choose the one that is practical and serves its business better.