A two-level discount model for coordinating a decentralized supply chain considering stochastic price-sensitive demand
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In this paper, a discount model is proposed to coordinate pricing and ordering decisions in a two-echelon supply chain, where demand is stochastic and price sensitive while lead times are fixed.Abstract:
In this paper, a discount model is proposed to coordinate pricing and ordering decisions in a two-echelon supply chain (SC). Demand is stochastic and price sensitive while lead times are fixed. Decentralized decision making where downstream decides on selling price and order size is investigated. Then, joint pricing and ordering decisions are extracted where both members act as a single entity aim to maximize whole SC profit. Finally, a coordination mechanism based on quantity discount is proposed to coordinate both pricing and ordering decisions simultaneously. The proposed two-level discount policy can be characterized from two aspects: (1) marketing viewpoint: a retail price discount to increase the demand, and (2) operations management viewpoint: a wholesale price discount to induce the retailer to adjust its order quantity and selling price jointly. Results of numerical experiments demonstrate that the proposed policy is suitable to coordinate SC and improve the profitability of SC as well as all SC members in comparison with decentralized decision making.read more
Citations
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References
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TL;DR: In this paper, the authors present a framework for inventory management and production planning and scheduling with a focus on the most important (Class A) and routine (Class C) items.
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Supply Chain Coordination with Contracts
TL;DR: This chapter extends the newsvendor model by allowing the retailer to choose the retail price in addition to the stocking quantity, and discusses an infinite horizon stochastic demand model in which the retailer receives replenishments from a supplier after a constant lead time.
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A Quantity Discount Pricing Model to Increase Vendor Profits
TL;DR: In this article, the authors analyze how a supplier can structure the terms of an optimal quantity discount schedule to maximize the supplier's incremental net profit and cash flow by adjusting its present pricing schedule to entice a major customer to increase its present order size by a factor of "K".
Journal ArticleDOI
Channel coordination and quantity discounts
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