Abstract
A supply chain system is studied, in which the information about the retailer’s storage cost is usually asymmetric. This paper studies the inventory control in the system and presents a quantity discount pricing model for inventory coordination based on the standard container, a transport tool from the supplier to the retailer with a fixed size. First, it investigates the inventory models under full information. Before inventory coordination, the supplier and the retailer my-opically choose their lot sizes, which is not the optimal decision for the whole system. Then, it presents an incentive scheme under asymmetric information from the point of view of the supplier. It also discusses the solution and the distribution of the incremental profits after the incentive scheme is adopted by both the supplier and the retailer. A con-stant in the model, which affects the distribution of the incremental profits, is optimized for the supplier by using numerical analysis. Finally, an example illustrates the application of the model. After inventory coordination, both the supplier and the retailer have a positive incremental profit.
Highlights
In order to improve managerial effectiveness, people have traditionally focused their efforts on making effective decisions within an organization
This paper studies the inventory control in the system and presents a quantity discount pricing model for inventory coordination based on the standard container, a transport tool from the supplier to the retailer with a fixed size
This paper has studied the inventory coordination of a supply chain system with a single supplier and a single retailer, in which the information about the retailer’s storage holding cost is asymmetric
Summary
In order to improve managerial effectiveness, people have traditionally focused their efforts on making effective decisions within an organization. Weng studies the all-unit quantity discount and the incremental quantity discount, and shows that both these discounts are equivalent in achieving channel coordination [5] Those traditional quantity discount models are studied under full information, and both the supplier and the buyer exactly know the cost structure of each other. In practice, such full information assumption is very hard to satisfy [6,7]. Shin & Benton consider that the lot-size should be augmented by an integer multiple, and propose a quantity discount approach to coordination [10] These researches are all assumed that the supplier has full information. The main symbols are listed as follows: D: the annual demand; P: the retailer’s selling price; P1: the retailer’s purchase price; P2: the supplier’s purchase price; h1: the retailer’s yearly unit holding cost; h2: the supplier’s yearly unit holding cost; S1: the retailer’s fixed ordering cost per order; S2: the supplier’s fixed ordering cost per order; QS: the size of the standard container; Q: the retailer’s lot-size; d: the unit discount under full information; dA: the unit discount under asymmetric information; YN1: the retailer’s yearly profit without discount; YN2: the supplier’s yearly profit without discount; YND1: the retailer’s yearly profit with discount; YND2: the supplier’s yearly profit with discount
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