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: 2.75). 06/2008; 113(2):518-527. DOI: 10.1016/j.ijpe.2007.10.024


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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    • "Many studies have focused on the effect of promotions on sales (Goyal & Gunasekaran, 1995; Ramanathan & Muyldermans, 2010; Sana, 2010, 2011a,b). Generally speaking, customers' purchasing behaviour is predicted from implication of promotions such as price discounting, advertising, free gifts, better services, delay-in-payments, stock display, etc (Goyal & Chang, 2009; Soni & Shah, 2008; Zhou, Min, & Goyal, 2008). Owing to advances in modern research, fuzziness of key parameters and variables is essential for analyzing any kind of inventory control problem. "
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    ABSTRACT: This paper deals with a new approach of linguistic dichotomous fuzzy variables for a classical backordered EOQ (Economic Order Quantity) model with PE (Promotional Effort) and selling price dependent demand rate. In practice, we have observed that the demand rate during a shortage period decreases with time. Based on these assumptions, we have developed a cost minimization problem (a crisp model) by trading off setup cost, inventory cost, backordering cost and cost for promotional effort. Then, we have studied a fuzzy model by considering the coefficient vectors as pentagon fuzzy numbers associated with some co-ordinates. Defuzzification is made with the help of the center-of-gravity method followed by a ranking index and the Euclidean distance of the objective function. Considering a numerical example, phi- (ϕ-)coefficients have been computed for each method and a decision is made according to the natural characteristics of the decision variables. Finally, conclusions are drawn, explaining the justification of the model.
    Full-text · Article · Jan 2015
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    • "(3) Use Game Theory to analyse profit distribution in supply chains. Literature[11]and Literature[12]discussed how the producer prices and how the retailer decides the order quantity under the Stackelberg Game structure and developed a cooperative game model to implement profit sharing between the manufacturer and the retailer utilizing Nash bargaining model, respectively. Literature[13]analysed the impact of surplus division in supply chains on investment incentives with a biform-game approach, and literature[14]analysed both simultaneous-move and leader-follower games to determine the Nash and Stackelberg equilibrium, respectively, and achieved the globally optimal solution that maximizes the system-wide expected profit. "
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    ABSTRACT: With the development of e-commerce, its influence on supply chain and supply chain management is becoming increasingly significant too. In this paper, the literature on the supply chain profit is reviewed first, and then a two-level and four-party supply chain which consists of a supplier, an e-commerce platform, third-party logistics, and demander is taken into consideration. The profit function of supply chain under e-commerce is formulated by taking the price of product and the maximum supply amount under certain investment as decision-making variables and taking the expected value of random variables of price as the setting sales quantity. Finally, the existence of maximum profit in the supply chain is proved in the model, and the coordination of supply chain under e-commerce environment can be achieved by setting coordination parameters when the relevant cost parameters of supply chain members satisfy certain conditions.
    Full-text · Article · Jun 2014 · Discrete Dynamics in Nature and Society
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    • "But, they have not considered the impact of stock dependency factors on return policy in coordinating the supply chain. Zhou et al. (2008) [15] in their recent work have considered the stock-dependent demand rate in coordinating a channel. "
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    ABSTRACT: In this paper, a coordination model is developed for a single manufacturer-single retailer distribution supply chain dealing with short life-cycle products, operating under price-sensitive and stock-dependent random demand. Here, the demand is modeled in additive fashion that captures the three features, namely, price-sensitivity, initial stock dependency and uncertainty of demand. A numerical study is carried out to illustrate the model and sensitivity analysis is performed to analyze the impact of price-sensitivity, stock-dependency, and demand uncertainty on the supply chain performance. It is found that under the same price-sensitivity, at higher levels of stock dependency, as the demand variability is increased, supply chain performance is decreased.
    Full-text · Article · May 2013
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