Pricing, manufacturing and inventory policies for raw material in a three-level supply chain
TL;DR: The goal of the paper is to optimise the total cost of the supply chain network by coordinating decision-making policy using Stackelberg–Nash equilibrium and numerical examples are presented.
Abstract: We studied a decentralised three-layer supply chain including a supplier, a producer and some retailers. All the retailers order their demands to the producer and the producer order his demands to the supplier. We assumed that the demand is price sensitive and shortage is not permitted. The goal of the paper is to optimise the total cost of the supply chain network by coordinating decision-making policy using Stackelberg–Nash equilibrium. The decision variables of our model are the supplier's price, the producer's price and the number of shipments received by the supplier and producer, respectively. To illustrate the applicability of the proposed model numerical examples are presented.
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TL;DR: A Vendor Managed Inventory (VMI) model for a two-level supply chain comprised of one vendor and several non-competing retailers in which both the raw material and the finished product have different deterioration rates is developed.
150 citations
92 citations
TL;DR: In this paper, the authors consider two competing supply chains where both chains launch the same product under different brands to the market by applying different composite coordinating strategies, such as discount, return, refund, buyback, or other coordinating policies to abate the operation costs of the chains.
Abstract: In today’s global highly competitive markets, competition happens among supply chains instead of companies, as the members of supply chains. So, the partners of the chains seek to apply efficient coordinating strategies like discount, return, refund, buyback, or the other coordinating policies to abate the operation costs of the chains and subsequently increase market shares. Hence, because of the importance and application of these strategies in the current non-exclusive markets, in this study, we introduce different composite coordinating strategies to enhance the coordination of the supply chains. Here, we consider two competing supply chains where both chains launch the same product under different brands to the market by applying different composite coordinating strategies. Each supply chain comprises one manufacturer and a group of non-competing retailers where the manufacturer receives raw materials from an outside supplier and transforms them into a finished product; then, the products are sold to...
72 citations
Cites background from "Pricing, manufacturing and inventor..."
...Taleizadeh and Noori-daryan (2014) discussed coordinating decision-making strategies like pricing, production and inventory policies in a three-echelon supply chain with a supplier, a manufacturer and multiple retailers; in their configuration, the relationships between members of the chain are modelled by a Stackelberg game-theoretic approach....
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...Taleizadeh and Noori-daryan (2014) discussed coordinating decision-making strategies like pricing, production and inventory policies in a three-echelon supply chain with a supplier, a manufacturer and multiple retailers; in their configuration, the relationships between members of the chain are…...
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TL;DR: 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.
52 citations
TL;DR: Because plants emit greenhouse gases (carbon dioxide), the authors considered mitigation efforts and the rate of demand in the model was assumed proportional to the unit purchasing cost and partial backordering was allowed as a fixed parameter.
Abstract: Typical economic order quantity models of inventory feature demand rate as a constant parameter and do not allow for backordering. Furthermore, the purchasing cost of the ordered materials is considered constant. In reality, the demand rate is related to the unit purchasing cost and other factors, such as time and availability of products in the market. A quantity discount is regularly applied to encourage ordering more products by decreasing the price. In some situations, carbon dioxide emissions are carefully scrutinized and a program to handle these. Greenhouse gases are put in place. Hence, for this research, the rate of demand in the model was assumed proportional to the unit purchasing cost and partial backordering was allowed as a fixed parameter. Because plants emit greenhouse gases (carbon dioxide), we considered mitigation efforts. A mathematical model and computational procedures are shown with the solution algorithms that demonstrate the capability of the model. An example problem was solved with the model and sensitivity analysis was conducted to inform the managerial insights offered.
50 citations
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TL;DR: In spite of the high level of interest in inventory control that has sprung up recently among statisticians, economists, and businessmen, very little has been written that indicates the fundamental connection between price theory and inventory control.
Abstract: In spite of the high level of interest in inventory control that has sprung up recently among statisticians, economists, and businessmen, very little has been written that indicates the fundamental connection between price theory and inventory control. Most of the inventory control systems now in operation assume a given price structure. The analysis is frequently restricted to cost minimization. Economic theorists, on the other hand,~have concerned themselves with profit maximization but have not ordinarily concerned themselves with the realistic details underlying the construction of their curves. Only in the event that other variables external to the cost minimization problem are assigned optimal values will the cost minimization problem be equivalent to profit maximization.
704 citations
"Pricing, manufacturing and inventor..." refers background in this paper
...Many authors have focused on optimal decision policies in their researches, like Whitin (1955) who studied a pricing theory and inventory policies in order to minimise the total cost of an inventory system....
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01 Jan 2004
TL;DR: Game theory is a powerful tool for analyzing situations in which the decisions of multiple agents affect each agent's payoff as discussed by the authors and deals with interactive optimization problems, such as games with imperfect information and auctions.
Abstract: Game theory (hereafter GT) is a powerful tool for analyzing situations in which the decisions of multiple agents affect each agent’s payoff. As such, GT deals with interactive optimization problems. While many economists in the past few centuries have worked on what can be considered game-theoretic models, John von Neumann and Oskar Morgenstern are formally credited as the fathers of modern game theory. Their classic book “Theory of Games and Economic Behavior”, von Neumann and Morgenstern (1944), summarizes the basic concepts existing at that time. GT has since enjoyed an explosion of developments, including the concept of equilibrium by Nash (1950), games with imperfect information by Kuhn (1953), cooperative games by Aumann (1959) and Shubik (1962) and auctions by Vickrey (1961), to name just a few. Citing Shubik (2002), “In the 50s ... game theory was looked upon as a curiosum not to be taken seriously by any behavioral scientist. By the late 1980s, game theory in the new industrial organization has taken over ... game theory has proved its success in many disciplines.”
691 citations
"Pricing, manufacturing and inventor..." refers methods in this paper
...Cachon and Netessine (2004) analysed an SC by game theory and Yu, Liang, Huang and George (2006) utilised Stackelberg game in a vendor-managed inventory (VMI) system including a manufacturer as a leader and multi-retailer as a follower....
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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".
Abstract: In this paper, we analyze how a supplier can structure the terms of an optimal quantity discount schedule. The vendor's challenge is to adjust his present pricing schedule to entice his major customer to increase his present order size by a factor of "K." Optimal levels for "K" and the corresponding price discount are determined in order to maximize the supplier's incremental net profit and cash flow. Implementation issues are discussed and future research needs identified.
670 citations
Additional excerpts
...Banerjee (1986) proposed a model from a vendor’s perspective to obtain an optimal quantity discount schedule....
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TL;DR: In this paper, the authors present a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers, where the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees.
Abstract: This paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers. The joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees. Both the annual demand rate and the operating cost-including the purchase, ordering, and inventory holding costs-depend on the joint decision policy employed. This paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination. It is shown that the optimal all-unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination. Furthermore, it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization. The analyses of the general models are illustrated by specific analytical results obtained for a given demand function.
659 citations
"Pricing, manufacturing and inventor..." refers methods in this paper
...For instance, Weng (1995) employed decision policies on channel coordination in a supply chain including a supplier and multi buyers....
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TL;DR: In this article, the influence of channel structures and channel coordination on the supplier, the retailer, and the entire supply chain in the context of two single-channel and two dual-channel supply chains was investigated.
509 citations