Supply-chain coordination under an inventory-level-dependent demand rate
ABSTRACT In this paper, we consider coordination issues of a distribution system composed of a manufacturer and a retailer. The manufacturer offers a single product to the retailer and the demand for the product at the retailer's end is stock dependent. We focus on three aspects of the resulting supply chain. First, we discuss the manufacturer-Stackelberg game structure to determine how the manufacturer sets the wholesale price of the product and how the retailer in turn determines the order quantity. We assume that both the parties share relevant cost information. Then we develop a simple profit-sharing mechanism that would ultimately achieve perfect channel coordination. Finally, the manufacturer is provided with a quantity discount scheme to induce the retailer to increase the order quantity so as to maximize the manufacturer's profit. We show that this discount scheme also achieves the perfect coordination of the whole channel. Numerical examples are used to illustrate the models.
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ABSTRACT: This article develops a supply chain coordination model with a single-vendor and a single-buyer. The vendor manufactures the product in lots and delivers to the buyer in equal shipments. However, the vendor’s production process is not perfectly reliable. During a production run, the process may shift from an in-control state to an out-of-control state at any random time and produces some defective items. The buyer whose demand is assumed to be linear function of the on-hand inventory performs a screening process immediately after each replenishment. Moreover, the buyer’s inventory is deteriorated at a constant rate over time. The vendor-buyer coordination policy is determined by minimizing the average cost of the supply chain. It is observed from the numerical study that channel coordination earns significant cost savings over the non-coordinated policy.International Journal of Industrial Engineering Computations. 01/2011;
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ABSTRACT: We develop an integrated vendor–buyer model for a two-stage supply chain. The vendor manufactures the product and delivers it in a number of equal-sized batches to the buyer. The items delivered are presented to the end customers in a display area. Demand is assumed to be positively dependent on the amount of items displayed. The objective is to maximize total supply chain profit. The numerical analysis shows that buyer–vendor coordination is more profitable in situations when demand is more stock dependent. It also shows that the effect of double marginalization provides a link between the non-coordinated and the coordinated case.Transportation Research Part E: Logistics and Transportation Review. 01/2010;
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ABSTRACT: Short life-cycle products which are characterized by uncertain demand, short selling season and long lead times have been posing many challenges to supply chain members. Demand of these products depends on several factors such as price, quality, service etc. Apart from these, many business practices have revealed that presence of a larger quantity of goods displayed at retail level also attract customers considerably. This paper captures the stock dependency phenomenon and investigates the role of quantity discounts and returns policies in the coordination of a supply chain. Here, the manufacturer in addition to returns policy provides quantity discounts to two competing retailers who face price-sensitive, stock dependent and uncertain demand. Using the newsvendor framework, a combined contract model is developed and sensitivity analysis is performed to analyze the impact of various parameters on supply chain coordination. The result shows that proposed contract mechanism fails to coordinate when the value of price sensitivity factor approaches the value of cross price sensitivity factor. Further, price-sensitivity and cross-price sensitivity have little effect on coordination benefit at lower values of stock dependency whereas there is a significant impact at higher values of stock dependency.Operational Research 01/2011; 11:259-279.