Abstract
In this article, a two-echelon supply chain model with a single-vendor a single-buyer is considered. The vendor's production process is imperfect and the market demand is assumed to be dependent on the buyer's selling price and warranty period. The vendor consents to return a definite portion of the buyer's purchase value, if any product is found defective within the length of warranty. The refund value or the warranty cost is considered as a function of the warranty period and the buyer's selling price of the item. This warranty cost is assumed to be fully borne by the vendor in the first model (Model I) while in the second model (Model II), it is assumed that the buyer agrees to bear a portion of the warranty cost. The proposed models are solved under decentralized scenario. We also derive and optimize the average total profit of the supply chain in order to obtain the optimal decisions of the centralized model. We consider a Stackelberg game between the vendor and the buyer in the decentralized scenario, where the vendor is assumed to be the leader and the buyer as the pursuer. Through numerical study, it is observed that, with respect to all the key decisions of the models, Model II provides better outcomes than Model I. Sensitivity analysis is also carried out to examine the impacts of changes of parameter-values on the optimum decisions.
Highlights
Chain management (SCM) can be defined as the management of flow of goods and services, beginning with the source of the product and ending with the use of the product of the user
We introduce the impact of warranty period and selling price simultaneously on demand in a two-echelon supply chain model
The market demand depends on the selling price and the warranty period of the product
Summary
Chain management (SCM) can be defined as the management of flow of goods and services, beginning with the source of the product and ending with the use of the product of the user. We develop a two-echelon supply chain model consisting of a vendor and a buyer where the defective items in each lot are rejected at the end of the buyer's 100% screening process This model considers a simple and practical situation where the delivery quantity to the buyer at each shipment is identical. This article incorporates the view of the integrated vendor-buyer approach into the supply chain model with warranty and price dependent demand, and an agreement between the vendor and the buyer to share warranty cost . This model considers that the delivery quantity to the buyer at each shipment is identical as in Huang (2004).
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