Coordinated Inventory Models with Compensation Policy in a Three Level Supply Chain

In this paper, we develop inventory models for the three level supply chain (one supplier, one warehouse, and one retailer) and consider the problem of determining the optimal integer multiple n of time interval, time interval between successive setups and orders in the coordinated inventory model. We consider three types of individual models (independent model, retailer’s point of view model, and supplier’s point of view model). The focus of this model is minimization of the coordinated total relevant cost, and then we apply the compensation policy for the benefits and losses to our coordinated inventory model. The optimal solution procedure for the developed model is derived and the effects of the compensation policy on the optimal results are studied with the help of numerical examples.