A mutual beneficial pricing strategy of an integrated vendor-buyers inventory system

Abstract

This study develops an optimal pricing and replenishment policies in a “leagile” (lean and agile) supply chain system for a single vendor and multiple buyers. Since it benefits the vendor more than the buyers in the integrated system, a pricing strategy with price reduction is incorporated to entice the buyers to accept the minimum total cost integrated system. Negotiation factors are incorporated to balance the cost saving between the players. A numerical example with sensitivity analysis is provided to demonstrate the theory and the cost savings when integration is considered. The price reduction mechanism is a mutual beneficial strategic partnership between the vendor and the buyers.