Procurement planning in a multi-period supply chain: An epiphany

Abstract

Pricing and inventory distribution strategy in a multi-period supply chain environment has not yet been comprehensively explored. We derive closed-form solutions for both two-and three-echelon supply chains under a manufacturer-stackelberg game framework where the supply chain members execute integrated procurement planning by taking account upto four consecutive selling periods. Optimal pricing and inventory distribution policy is identified in the perspective of each member among three pragmatic procurement scenarios. Our results demonstrate that both integrated procurement strategies outperform conventional single-period decision and reduce double-marginalization effect. But, the retailer can prefer bulk procurement to earn maximum profit. The distributor acts as a catalyst, prevents the retailer from executing integrated multi-period procurement planning and creates conflict among supply chain members. Procurement decisions in presence of strategic inventory may lead to suboptimal profits compared to bulk procurement and supply chain members can face some implementation issues. Supply chain members always receive higher profits if the retailer distributes inventory strategically in a multi-period supply chain.