This dissertation deals with the issue of order coordination in a decentralized two-echelon supply chain, which consists of a single wholesaler and multiple retailers. An order coordination scheme is proposed in which the wholesaler offers a price discount to retailers who coordinate their order timing with the wholesaler's cycle. The wholesaler, who replenishes his stock from an external supplier at a pre-specified order interval, has an incentive to offer such timing discount because it may lead to a substantial reduction in his on-hand inventory by inducing retailers to hold more stocks. On the other hand, the retailer's decision to coordinate is dictated by the cost minimization criteria, and thus he will never be worse off by taking advantage of the price discount.; We consider order coordination policy under two cases: In the first case, we investigate a situation where demand at retailers is constant over time. We develop and analyze a coordination model, which indicates optimal ordering policies for the retailers (i.e. number of orders placed during the wholesaler's reorder cycle and the length of their own order intervals) and further present a method of finding the wholesaler's optimal discount price. The impact of varying retailer homogeneity and the number of retailers on the wholesaler's profitability is examined. In the second case, we study a coordination model when demand at each retailer is random. We propose an extended periodic order-up-to R policy for the retailers: after placing an order at a discount price at the beginning of the wholesaler's cycle, each retailer gets a number of opportunities to place (or skip) orders at the regular list price depending on his inventory level. We derive retailer's expected cost function and wholesaler's profit function based on this proposed policy.; Computational results illustrate that our coordination policy based on the timing discount is especially beneficial to the wholesaler when he supplies 'many homogeneous retailer'. It is also observed in the deterministic demand case that the nested coordination policy with a strict price discount generally results in lower costs for the retailers than the EOQ policy.
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