Abstract
This paper explores the quantity discount coordination models in the fashion supply chain with uncertain yields and random demand. The paper proves that, under the independent and noncoordinated decision patterns, there exists a Nash equilibrium between the supplier and the manufacturer which reduces the supply chain's profit margin. In order to achieve the “optimal” centralized supply chain expected profit margin, new quantity discount models have been established. Both the supplier-oriented and the manufacturer-oriented Stackelberg supply chain gaming models are investigated. Our analytical and numerical analyses show that the quantity discount contract proposed in this paper can largely reduce the negative influence brought by the uncertainty of yields and demand. Therefore, the profit margin of supply chains based on quantity discount can reach the optimal level of the supply chain under the centralized setting.
Highlights
Chain coordination has been the central theme for the majority of supply chain management researches
To deal with the decision-making problems of producing and ordering in the supply chain which are characterized by the uncertainty two-echelon yields and random demand, Peng and Zhou [9] established inventory models of supply chains including both centralized and decentralized decision making
The profit margin of supply chains based on quantity discount can reach the profit level of the supply chains based on centralized decision making
Summary
Chain coordination has been the central theme for the majority of supply chain management researches. This paper adds to these growing efforts of improving supply chain effectiveness by analyzing the quantity discount contract in a fashion supply chain characterized by the uncertainty in two-echelon yields and random demand, namely, the uncertainty in the production of raw materials and in the production of finished goods (as Figure 1). The coordination of a supply chain with the manufacturer output uncertain, especially with uncertainity in two-echelon yields and demand has not researched. It is of important significance to research the coordination mechanism of supply chain with uncertainity in two-echelon yields and demand. This paper mainly researches the quantity discount contract and model in the fashion supply chain with uncertainty in two-echelon yields and demand. It analyses how to determine the qualification point of quantity discount and the discount rate so as to reach the profit level of the supply chains based on centralized decision making
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