Article 5, Volume 5 Issue 1

Supplier–customer negotiation model: the vendor receives a bonus for holding the inventory

Author

Frederic Marimon – (Universitat Internacional de Catalunya)

Jasmina Berbegal-Mirabent – (Universitat Internacional de Catalunya)

Received September 26, 2018; accepted October 8, 2018.

Abstract

This article proposes a model based on economic order quantity (EOQ) for the negotiation between supplier and customer when a benefit is derived to the supplier from taking responsibility for the inventory holding costs. In turn, the customer can afford a smaller batch size since the holding savings enable it to place a greater number of orders. Taking the original situation in which the customer supports both holding and ordering cost as an initial point, the paper analyses the benefits for the supplier and customer in a new situation in which the supplier supports the holding of the inventory. The customer would agree to change to the new scenario due to the savings in the holding cost. The provider would also agree if a bonus is achieved as compensation for the investment in holding costs. The model provides clues for a win-win negotiation between a supplier and a buyer.

Este artículo propone un modelo basado en la cantidad de orden económica (EOQ) para la negociación entre el proveedor y el cliente cuando se deriva un beneficio para que el proveedor asuma la responsabilidad de los costos de mantenimiento del inventario. A su vez, el cliente puede permitirse un tamaño de lote más pequeño, ya que los ahorros en tenencia le permiten realizar un mayor número de pedidos. Tomando la situación original en la que el cliente respalda los costos de mantenimiento y pedido como punto inicial, el documento analiza los beneficios para el proveedor y el cliente en una nueva situación en la que el proveedor respalda la conservación del inventario. El cliente estaría de acuerdo en cambiar al nuevo escenario debido a los ahorros en el costo de mantenimiento. El proveedor también estaría de acuerdo si se logra una bonificación como compensación por la inversión en costos de tenencia. El modelo proporciona pistas para una negociación de beneficio mutuo entre un proveedor y un comprador.

Citation

Marimon, F., & Berbegal‐Mirabent, J. (2018). Supplier-Customer Negotiation Model: The Vendor Receives a Bonus for Holding the Inventory. European Accounting and Management Review5(1), 94-108.

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