Document Type : Article
Department of Industrial Engineering, Faculty of Engineering, Alzahra University, Tehran, Iran
Faculty of Asia Pacific Studies, Ritsumeikan Asia Pacific University, Beppu, Japan
Lead time fluctuations cause a low supply chain service level through increasing stock-outs. Lack of the supplier’s awareness of the retailers’ ordering policy is one of the main reasons for the lead time fluctuations. In this paper, a two-echelon supply chain including single supplier, multiple retailers is studied under two scenarios of decentralized and centralized decision-making. In the first scenario, each retailer independently uses a continuous review inventory policy and the supplier does not know when each retailer will order. This policy prolongs order fulfillment by the supplier and increases order-processing costs. In the second scenario, retailers are encouraged to enter into a joint cooperation plan and change their ordering policy from independent continuous review policies to a joint periodic review policy. In this case, the supply chain can utilize the benefits of economies of scale via integrating and shipping several retailers’ orders. The study also determines range of the acceptable lead time reduction by supplier and retailers for participating in the joint cooperation plan. The results show that joint cooperation plan creates more benefits for the supply chain in terms of cost and service level.