Managing multi-echelon multi-item channels with trade allowances under credit period

In this paper we consider multi-echelon multi-item channels subject to supplier's credit period and retailer's promotional effort. The retailer determines the promotional effort and the joint replenishment cycle while still maximizing profits from the perspectives of the individual and channel. We analyze two trade allowances, the promotion cost sharing and the cash discount, which are designed for coordinating the channel partner's behavior. This study provides a comparison model for each party to realize the preference of the coordinating mechanism in light of allowance ratios. Our findings show it is beneficial for both parties to have a coordinating mechanism when a promotion is conducted. (C) 2009 Elsevier B.V. All rights reserved.