Supply-chain coordination under an inventory-level-dependent demand rate

Department of Decision Science and MIS, Concordia University, Montreal, Quebec, Canada H3G1M8
International Journal of Production Economics (Impact Factor: 2.08). 06/2008; 113(2):518-527. DOI: 10.1016/j.ijpe.2007.10.024

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.

  • [Show abstract] [Hide abstract]
    ABSTRACT: This paper considers a two-echelon supply chain system consisting of one manufacturer and one retailer for deteriorating items. Shortages are not allowed and the market demand is simultaneously influenced by multiple factors including promotional effort, selling price, on-hand inventory level and time. Demand information is symmetrically known to both the manufacturer and the retailer, hence, the promotional effort is assumed to be provided by both members. For the system where the manufacturer and the retailer share the investment cost of promotional effort equally, it is shown that revenue sharing contract and revenue and cost sharing contract can both lead to perfect coordination. Comparing these two contracts, it is also found that the latter contract is easier to be accepted by the system. Hence, revenue and cost sharing contract is applied to coordinate the general system, and the range of revenue sharing fraction leading to a win-win outcome is obtained. Two numerical examples are presented to illustrate the development of the model with sensitivity analysis.
    01/2015; 2(1):1-14. DOI:10.1080/23302674.2014.998314
  • International Journal of Systems Science 12/2014; DOI:10.1080/00207721.2014.938784 · 1.58 Impact Factor
  • [Show abstract] [Hide abstract]
    ABSTRACT: We consider the problem of pricing and alliance selection that a dominant retailer in a two-echelon supply chain decides when facing a potential upstream entry. The two-echelon supply chain consists of a dominant retailer, an incumbent supplier and an “incursive” vendor, where both the incumbent supplier and “incursive” vendor sell substitutable products to the common market through the dominant retailer. Our objective is to discuss whether the dominant retailer should sell the “incursive” vendor's products and, if so, how the dominant retailer strategically selects the alliance structure to maximize his/her own profit. We also present how all the members make their pricing decisions and analyze the impact of competitive intensity between two products on their pricing strategies after the entry of the vendor in possible alliance settings. Our results show that: (1) the introduction of the upstream vendor always benefits the retailer, and more interestingly, benefits the incumbent suppler in many cases, too; (2) in this paper, we define the competitive ability as the price dominance of one player over another when both are competing for the same customer market, if the price competition between the incumbent supplier and the “incursive” vendor is relatively fierce, the dominant retailer should ally with the one who has a relatively strong competitive ability rather than the other who has a relatively weak competitive ability; otherwise, he/she should ally with both upstream members. Finally, using numerical examples, we analyze the impact of different parameters and provide some management insights.
    European Journal of Operational Research 05/2015; 243(1). DOI:10.1016/j.ejor.2014.11.004 · 1.84 Impact Factor