Coordinating a Three-level Supply Chain with Financial Constraints

Supply chain coordination is extensively used as an effective tool for firms to
stay competitive and improve their profitability. However, this solution may
fail if the financial problems of the firms are ignored in the operations. To
solve this challenge, we have proposed a coordination scheme using internal
financing for a three-level supply chain facing some financial constraints.
This case is modeled as a bi-objective optimization problem that optimizes
both system’s costs and service level. We have solved the model using ε-
constraint method. The results show that the proposed coordination scheme
can provide full service level (100%) to the customer, while the non-
coordinated system cannot reach more than 50% of the service level.
Furthermore, the system’s operational and financial costs are reduced by
coordination.