Fair Transfer Prices of Global Supply Chains in the Process Industry

This work addresses the optimisation of transfer prices for the fair profit distribution among the members involved in a global supply chain in the process industry. A mixed integer linear programming (MILP) model is developed for production and distribution planning of global supply chains, where the optimal transfer prices of products between plants and markets are determined. Two solution approaches are presented for fair solutions using Nash and lexicographic maximin principles. The applicability of the proposed models and approaches are demonstrated by an illustrative example. The results show that both approaches can fairly distribute the whole supply chain’s profit to the members.