Coordination of joint pricing-production decisions in a supply chain

We consider the coordination of dynamic, joint pricing-production/ordering decisions in a decentralized supply chain where a manufacturer outsources her product distribution/retailing function to an independent distributor/retailer. The manufacturer produces and wholesales her product to the distributor who, after some further processing, sells the product to an external market. In a leader-follower setting with convex production/ordering cost functions, both parties make pricing and production/ordering decisions over a discrete, finite-time horizon (a selling season) to maximize their respective profits. For a given manufacturer's (the leader's) wholesale price schedule, we develop a simple forward algorithm to solve the distributor's problem optimally, and prove a planning horizon property of the solution. Our key result is to show the existence of a manufacturer's price schedule that induces distributor to adopt decisions in the decentralized setting to achieve the performance of a centralized supply chain. Based on this channel-optimal pricing policy we then develop an incentive scheme for the manufacturer to achieve channel coordination. A numerical example is provided to compare the performance of different policies and lo reinforce key managerial insights generated through analysis.     

Pricing and ordering strategies in manufacturing and distribution alliances

This paper studies the effect of coordination in a manufacturing and distribution system consisting of one manufacturer and one distributor. The system operates to meet price-sensitive random demand with the objective of maximizing expected profits of both the manufacturer and the distributor. The coordinated pricing and production/ordering policies that maximize the expected profits of the manufacturer and the distributor, as well as the distributor's optimal pricing and ordering policies without coordination, are developed. The focus of this study is to address the following managerial questions: What factors make coordination an effective strategy for both the manufacturer and the distributor? What are the coordination strategies and the coordinated policies that maximize both parties' expected profits and the joint expected profit? These and other related managerial issues are explored in this paper.     

Rebate, returns and price protection policies in channel coordination

We study channel coordination policies for products subject to midlife price declines during their short product life cycles. Using a two-period supply chain model consisting of one supplier and one retailer, we identify policies and/or conditions under which the supply chain can be coordinated and a win-win situation can be guaranteed. We also provide algorithms to determine the win-win policy parameters. We show that if there are two purchase opportunities, then under linear or decreasing (the more you buy, the lower price you pay) pricing strategies, there may not exist a win-win policy. Our analysis shows that several findings in the single-period models prevalent in the supply chain research literature to date do not extend to the two-period model with two purchase opportunities. For example, returns policies and revenue sharing contracts are no longer equivalent. Also, quantity discounts may never lead to a win-win situation. In fact, the supplier may need to charge more for large orders in order to achieve a win-win outcome. Finally, the analytical framework of this paper can be applied to situations in which the price is constant but production costs change over time.     

Enhanced joint pricing and lotsizing problem in a two-echelon supply chain with logit demand function

In retail supply chains, ordering and pricing policies for the retailer and shipment plan for the supplier are the most important decisions. These policies are often conducted either individually or sequentially with poor overall performance for the whole supply chain resulting to extra inventory and other deficiencies. In this paper, an integrated marketing-inventory model in a two-echelon supply chain model is developed involving discount promotion, customer behaviour more realistically and operations aspects to determine optimal ordering, shipping and pricing quantities simultaneously. An efficient analytical solution procedure and a Particle Swarm Optimisation solution algorithm are also developed. Finally, a number of numerical tests are conducted to approve the interesting theoretical results of the analytical approach.     

供应链订货与营销渠道协调的主从对策模型

研究了供应链订货与营销渠道的协调问题,考虑了零售商具有订货成本缩减和营销投资成本,建立了供应链订货与营销渠道协调的Stackelberg主从对策模型.这一模型中,主方零售商具有产品零售价格和投资决策权,从方供应商具有产品批发价格决策权.分析了零售商四种投资策略,针对每种投资策略下的协调模型进行了数值仿真,结果表明在零售商订货成本缩减和营销之间进行投资协调能够同时增加零售商和供应商利润.     

期权定价市场化情况下的供应链协调机制

通过对期权定价市场化情况下的供应链协调过程的研究,构建出期权定价市场化情况下的供应链决策机制模型.并对供应链期权契约双方的决策机制和决策过程进行深入分析,计算出使供应链整体利润优化化的供应商和零售商最优定价策略和最优采购决策,最后通过数例分析对结果进行验证.     

Product variety strategies for vertically differentiated products in a two-stage supply chain

In this paper, we study how the presence of coordination, competition and cost structures affect the product variety and pricing decisions in a two-stage supply chain. We consider vertically differentiated industries. Products reach the end customers via assembly companies positioned in the middle-tier between the producers and end customers. The assembly operations incur bill-of-materials (BOM) cost, which includes the cost of raw materials and components as well as the cost of producing, managing and synchronising supply, storage and distribution of these materials and components. We consider three coordination scenarios in the supply chain, and compare an uncoordinated supply chain with a horizontal and a vertical coordination scenario using the Nash equilibria of a multi-leader Stackelberg game between the producers and assembly companies. For exogenously given quality levels, we show that producers and assembly companies should either differentiate their product offering, or offer the high-end product only depending on the BOM cost. In addition, the uncoordinated scenario helps reduce the intensity of competition in the supply chain. For endogenous quality levels, partial product-differentiation equilibrium can emerge. Numerical experiments are performed to illustrate the impacts of BOM cost and quality levels on the equilibrium.     

Optimal ordering decisions under two returns policies

To avoid stockouts and maintain product availability, retailers typically carry excess units and subsequently incur higher cost. In case of style/fashion goods, demand forecasting is extremely difficult due to short selling cycles. The purpose of this study was to minimise the cost of excess stocking without compromising product availability. To achieve these conflicting objectives, our study includes two ordering instances and two returns policies. The time between orders subsequently helps resolve demand uncertainty. Existing studies consider only one type of returns policy, that is, returns on the entire purchase quantity; whereas our study considers two types of returns policies: returns on the first order size and returns on the entire purchase quantity. This study also includes models for the retailer and the supply chain system. Analytical and numerical insights into our study enable the retailer to select his appropriate returns policies to maximise his as well as system’s expected profits. We also show that perfect coordination of partners will help them improve their profits considerably.     

WOI-c假设下的供应链联盟转移定价研究

借鉴Nash均衡讨价还价模型和Roundy提出的序列优化算法,对实行WOI-c库存所有权模式的简单(及其扩展)二级供应链联盟中的转移定价策略进行了研究.通过将MA和OA思想相结合,运用序列优化算法和利润分享思想,为该联盟体的整体利益最大化目标提出了相适应的转移定价策略,及其为双方所接受的利润分配策略.通过一个算例对理论研究进行了证实/伪,发现根据序列优化算法得到的转移定价方法对规模较大的需求更为适用,准确性也更高.     

Technical note: production allocation,lot-sizing,and shipment policies for multiple items in multiple production lines

Kim, T., Hong, Y. and Lee, J., Joint economic production allocation and ordering policies in a supply chain consisting of multiple plants and a single retailer. International Journal of Production Research, 2005, 43, 3619–3632, discuss the joint production allocation and ordering policies of a single item in a supply chain consisting of multiple production lines in parallel. In this note, we extend their paper and develop joint economic production allocation, lot-sizing, and shipment policies in a supply chain where a manufacturer produces multiple items in multiple production lines and ships the items to the respective retailers.     

Pricing and remanufacturing decisions in two competing supply chains

This paper considers the pricing and remanufacturing decisions in a duopoly market with two competing supply chains, which compete at both manufacturer and retailer levels. There are one manufacturer and one retailer in each supply chain, one manufacturer produces the new product directly from raw material, while the other manufacturer has incorporated a remanufacturing process for used product into the original production system. Based on different industry organisation structures and the chain members’ competing forms, five game decision models are established to explore the chain members’ optimal strategies on price and/or remanufacturing, and the corresponding equilibrium solutions are obtained. Finally, we carry out the sensitivity analysis through numerical studies of some key parameters for examining their influences on the pricing decisions and chain members’ maximum profits. On the basis of comparison and analysis, some managerial insights are derived.     

The Supply Chain Contract Design under Cap-and-Trade Mechanism with Free Riding

This paper studies the influence of free riding on enterprise product pricing and carbon emissions reduction investment, as well as the contract design to achieve supply chain coordination under the carbon trading mechanism. First, we discuss the situation where carbon emissions reduction investment affects the product price and income. It demonstrates that the optimal investment of the upstream manufacturer increases with the degree of the free riding of the downstream manufacturer. The upstream manufacturer can improve their carbon reduction investment and the whole supply chain achieves Pareto improvement when the investment cost sharing contract is introduced. Nevertheless, under the cost-sharing contract the optimal investment of the decentralized supply chain is still lower than that of the centralized supply chain, and only in some particular cases can the two types of supply chain achieve equal total profits. Then, we preliminarily explore the situation where the product price and income is influenced by carbon emissions reduction investment. The consequences indicate that the optimal investment of the upstream manufacturers in this situation is less than the former one's, and the transfer payment mechanism is able to improve the level of the supply chain overall carbon emissions-reduction. Moreover, compared to the former situation, the effects of free riding of the downstream manufacturer are even more serious. The conclusions can provide some intellectual support for manufacturing enterprises to make reasonable emissions reduction strategies and coordinate the supply chain existing in free riding.     

Operations planning in a supply chain system with fixed-interval deliveries of finished goods to multiple customers

Raw material ordering policy and the manufacturing batch size for fixed-interval deliveries of finished goods to multiple customers play a significant role in economically managing the supply chain logistics. This paper develops an ordering policy for raw materials and determines an economic batch size for a product at a manufacturing center which supplies finished products to multiple customers, with a fixed-quantity at a fixed time-interval to each of the customers. In this model, an optimal multi-ordering policy for procurement of raw materials for a single manufacturing system is developed to minimize the total cost incurred due to raw materials and finished goods inventories. The carried over inventory of finished goods from the previous cycle is used as initial finished goods inventory, resulting in shifting the production schedule ahead for the next cycle. A closed-form solution to the problem is obtained for the minimal total cost. The algorithm is demonstrated for multiple customer systems.     

基于寄售的供应链批量协调问题研究

随着生产商柔性的提高,在基于寄售库存的供应链中,生产商和批发商的订货及库存持有成本发生了显著的变化,以此为背景,建立了一对一的供应链在寄售情形下的成本函数和批量模型,提出了当生产商的最优生产批量小于批发商的最优订货批量时,生产商可以通过按批发商的订货批量提供一定比例寄售,并转移部分获得收益给批发商的批量协调策略。算例分析表明,在一定条件下,该策略能够使生产商和批发商同时受益,从而使整个供应链实现帕累托优化。     

Optimal design methodologies for configuration of supply chains

This paper describes a methodology developed for designing an optimal configuration for a supply chain. A typical configuration for a supply chain consists of defining components of the system, assigning values to characteristics parameters of each component and setting operation policies for governing the interrelationships among these components. As such, each configuration will be defined by a set of values for quantitative parameters of the system as well as a set of policy and qualitative characteristics. Examples of quantitative variable include inventory levels and frequency of ordering where as location of distribution centres and mode of transportation between suppliers and the original equipment manufacturers (OEM) are the decision variables of policy and qualitative nature. The methodology presented here consists of a supply chain model builder coupled with two optimisation algorithms that automatically build a sequence of configurations that systematically move towards an optimum design. A combination of mixed integer programming and a genetic algorithm is used to determine simultaneously the values of quantitative as well as policy variables. The solution consists of strategic decisions regarding facility locations, stocking locations, supplier selection, production policies, production capacities, and transportation modes.     

Just-in-time purchasing: an integrated inventory model involving deterministic variable lead time and quality improvement investment

Nowadays supply chain management is a popular practice in manufacturing systems, and just-in-time (JIT) production plays a crucial role in supply chain environments. Companies are using JIT production to gain and maintain a competitive advantage. The characteristics of JIT systems are consistent high quality, small lot sizes, frequent delivery, short lead time, and close supplier ties. This paper presents an integrated inventory model to minimize the sum of the ordering/setup cost, holding cost, quality improvement investment and crashing cost by simultaneously optimizing the order quantity, lead time, process quality and number of deliveries while the probability distribution of the lead time demand is normal. This integrated inventory model is useful particularly for JIT inventory systems where the vendor and the purchaser form a strategic alliance for profit sharing.     

Applying genetic algorithms to dampen the impact of price fluctuations in a supply chain

Genetic Algorithms (GAs) have been identified as an innovative and useful approach for dampening the Bullwhip Effect along supply chains. This paper extends previous work by developing an improved supply chain model that incorporates additional cost factors such as ordering cost, item cost, distribution cost and production cost. The revised model is then used to examine one element of the Bullwhip Effect, i.e. price fluctuation strategies. A GA is employed to determine the ordering policy for each member in the model that minimises cost. The research illustrates how the GA performs if a sales promotion is introduced. From the experimental results, it is shown that a GA can help determine an improved ordering policy and reduce the total cost across the supply chain.     

Flexible work-in-process production system in supply chain management under quality improvement

For a complex product production, any flexible manufacturing system with a work-in-process inventory is recommended for a supply chain management (SCM) system. Building a flexible manufacturing system increases the total cost of the supply chain; for this reason, a discrete investment is important. For flexible production systems, production rate within a finite specific interval of production rate as work-in-process inventory is calculated. The aim of the supply chain is to reduce the total cost when demand during the lead time is a random variable with a normal distribution. A crashing cost is utilised to reduce the duration of lead time within the supply chain system. A model is proposed to obtain the optimal flexible production rate with the reduced total cost of the supply chain. A classical optimisation technique is employed to obtain the closed-form and quasi-closed-form solutions of the decision variables. An improved algorithm is designed to obtain the global minimum cost of SCM under the framework of a flexible production system. An illustrative numerical example and sensitivity analysis are given to test the model. A numerical study proves that this model obtains the minimum cost with the optimal decision variables.     

运输能力柔性约束的供应链Pareto优化策略

针对单位产品运输成本对批量敏感并由生产商负责产品运输的情况,建立了供需双方在分散决策和集中决策情形下的最佳批量模型.分析结果表明运输能力柔性越强,生产商的最佳生产批量越小,与批发商要求的短周期、小批量订货越接近,从而在不增加成本的情况下,生产商能够对批发商的需求快速响应.且当运输能力非完全柔性时,生产商可以通过降低产品转让价格改让批发商负责产品运输,以使批发商在分散决策情形下的最佳订货批量更接近于生产商的最佳生产批量和供应链在集中决策情形下的订货批量,从而在供需方双赢的前提下实现整个供应链的利益优化.     

A pricing/ordering model for a dyadic supply chain with buyback guarantee financing and fairness concerns

The paper investigates pricing/ordering issues in a dyadic supply chain, in which a core supplier sells products through a budget-constrained retailer. The retailer faces stochastic demand and is fairness-concerned as well. If needed, the retailer can get financing support from bank by means of buyback guarantee financing (BGF) mode, which is often used in China. By introducing Nash bargaining solution as the fairness reference point, we formulate the retailer’s fairness-concerned utility function and develop a two-echelon pricing/ordering game model. We then study the combined impacts of fairness concerns and BGF on two members’ equilibrium strategies and supply chain performance. We also discuss the corresponding issues under no budget constraint, no financing service and bank financing. Our results show that: (1) two members’ equilibrium strategies are significantly influenced by the retailer’s fairness-concerned behaviour and initial budget; (2) as compared to no budget constraint, BGF can bring the whole supply chain more performance, which means that BGF can yield value-added; (3) When the retailer takes the risk of uncertain market solely, the retailer’s fairness concerns are beneficial for supply chain to improve the performance.