Some models for understanding the cooperation between the supplier and the buyer

This paper presents some stochastic models of cooperation between the supplier and the buyer. We first recall some of the results that pertain to the case where the buyer and the supplier formulate their inventory policies independently and sequentially. Next, we analyse the case where the buyer and the supplier jointly determine the optimal order quantities. Our analysis shows that only the supplier benefits from such cooperation. In order to motivate the buyer to cooperate, we consider some cooperative strategies. These include the analysis of the impact of (1) price changes, (2) discount policies and (3) partial deliveries. The importance of coordination is brought out from the analysis.