Achieve Supply Chain Coordination Research Articles

Supply chain coordination with customer returns and retailer's store brand product

We examine a retailer's Stackelberg supply chain, in which the retailer sells a product in the two brands: its own store brand (SB) and a national brand (NB) supplied by a well-established manufacturer. The two brands both face customer returns, and they differ in product quality. We examine the retailer's decision on returns policies for the two brands (either Money Back Guarantee (MBG) or No Refund) and the effects of returns policies on the competition between the two brands. We identify the condition when the retailer should offer MBGs for both brands and we show that MBGs mitigate price competition between the two brands. MBGs are found to enhance the retailer's profit and reduce the NB manufacturer's profit. We examine coordination mechanisms and find that a centralized supply chain intensifies the competition and pushes the NB to reduce its retail price. A simple coordination contract that can achieve supply chain coordination to ensure a win-win for both the retailer and the NB manufacturer is proposed.

Shipping Unpredictable Demand for Online Sellers: Risk Penalty vs. Flat Rate

1. Problem Definition: We study the coordination of an E-commerce supply chain between online sellers and 3rd party shippers to meet random demand surges, induced by, for instance, online shopping holidays. 2. Academic/Practical Relevance: Motivated by the challenge of meeting the highly unpredictable demand surges in E-commerce, we study shipping contracts and supply chain coordination between online sellers and 3rd party shippers in a novel model taking the unique features of the shipping industry into account. 3. Methodology: We compare two shipping contracts: the risk penalty (recently proposed by UPS) and the flat rate (used by FedEx), and analyze their impact on the seller, the shipper, and the supply chain. 4. Results: We discover that against the common belief, the sophisticated risk penalty is not much better than the simple flat rate for the shipper. Although both the risk penalty and the flat rate can coordinate the supply chain, the risk penalty does so only if the shipper makes zero profit, but the flat rate can provide a positive profit for both. These results represent a new form of double marginalization and risk-sharing, in sharp contrast to the well-known literature on the classic supplier-retailer supply chain, where risk-sharing contracts (similar to the risk penalty) can bring benefits to all parties, but the single wholesale price contract (similar to the flat rate) can achieve supply chain coordination only when the supplier makes zero profit. We also find that only the online seller, but not the shipper, has the motivation to vertically integrate the seller-shipper supply chain. 5. Managerial Implications: Coordinating the seller-shipper supply chain is an important way to meet the unpredictable demand surges in E-commerce. Our results imply that the risk penalty is unnecessarily complex because the simple flat rate is just as good as the risk penalty for the shipper and is better for the seller-shipper supply chain as a whole. Our study also explains and supports the recent practice of online sellers (e.g., Amazon.com and JD.com), but not shippers, to vertically integrate the supply chain by consistently expanding their shipping capabilities.

Internal and external reference effects in a two-tier supply chain

We study a two-tier supply chain with a newsvendor retailer that has an internal reference effect related to its own profit as well as an external reference effect centered on the profit of the supplier. We show that the internal and external reference effects in isolation can have opposite effects on the wholesale price set by a supplier who has full knowledge on the retailer’s ordering bias. The internal reference effect, which is driven by the relative disutility from ex-post inventory error, causes the supplier to increase the wholesale price, whereas the external effect, which results from disadvantageous profit inequity, causes the supplier to decrease the wholesale price. While the internal reference effect can achieve supply chain coordination for items with a low profit margin, the external reference effect improves efficiency for high profit margin products, but never achieves coordination. When the retailer’s ordering behavior is influenced by both reference effects, then the interaction can improve efficiency and lead to an equilibrium where the supply chain is coordinated. We find that the relative impact of each reference effect is highly dependent upon the profit margin. We study these equilibria with full information as well as for a supplier who is naïve to the retailer’s behavioral biases and compare these results to derive insights into the behavioral management of supply chains.

A Stackelberg Game Model with Supply Chain Option Contracts under Random Yield and Stochastic Demand

Consider a supply chain consisting of a retailer and a supplier, and the yield of the supplier is random while the market demand of the retailer is stochastic. Due to the double marginalization, the wholesale price contract can’t achieve the coordination of the supply chain, we introduce option contracts into the supply chain in order to investigate whether option contracts can improve the supply chain’s performance under the circumstance where the yield and demand are all uncertain. Through establishing the dynamic Stackelberg game model, which is dominant by the retailer, we discuss the optimal production strategy of the supplier and the optimal purchasing strategy of the retailer, find that the relationship between the production input and the option order quantity is non-linear. In addition, sensitivity analysis indicate that the correlations of decision variables with several parameters. Researches show that option contracts not only offering flexibility for retailer’s purchasing, it can also achieve supply chain coordination under some certain conditions.

收益共享契约下零售商资金有限的供应链协调

本文研究了随机环境下由单个供应商和单个资金有限的零售商组成的二级供应链的协调问题，用批发价契约减少订购资金，使零售商能够用自有资金订货，用收益共享契约使供应商得到补偿。通过建立批发价和收益共享契约模型，分析了资金有限的零售商的决策选择和特征，讨论了供应链协调的条件。结果表明，选择适当的参数，批发价和收益共享契约可以实现零售商资金有限的供应链协调。最后，通过数值例子对理论结果进行了验证。 In this paper, a two-echelon supply chain is presented to achieve the supply chain coordination under random environment, consisting of a supplier and a retailer with limited funds. Using wholesale price contract to reduce the order funds, so that the retailer can order with its own funds and compensating the supplier by the revenue sharing contract. Through establishing a contract model of wholesale price and revenue sharing, the decision selection and characteristics are analyzed of retailer with limited funds, and the conditions of supply chain coordination are discussed. The results show that selecting the appropriate parameters, the combined wholesale price contract with the revenue sharing contract can achieve supply chain coordination of retailer with limited funds. Finally, numerical examples are presented to proof the theoretical results.

Research on Two-Echelon Green Supply Chain Decision under Government Subsidy

With the background of government subsidies and increasing consumer environmental awareness, this article establishes a two-echelon supply chain model of manufacturer and retailer. Based on this model, this article analyzes the decision-making problems of manufacturer and retailer under both decentralized and centralized decision modes, and the impact of consumer green sensitivity on product pricing, green degree and other decisions. The results show that government subsidies, higher consumer green sensitivities are conducive to green product promotion and members of decentralized decision supply chain, but higher consumer green sensitivity will reduce the overall supply chain profit in a centralized decision mode. Finally, this paper discusses the design of supply chain contract mechanism in decentralized decision mode to achieve supply chain coordination.

Recycling Pricing and Coordination of WEEE Dual-Channel Closed-Loop Supply Chain Considering Consumers' Bargaining.

Environmentally friendly handling and efficient recycling of waste electrical on Waste Electrical and Electronic Equipment (WEEE) have grown to be a global social problem. As holders of WEEE, consumers have a significant effect on the recycling process. A consideration of and attention to the influence of consumer behavior in the recycling process can help achieve more effective recycling of WEEE. In this paper, we built a dual-channel closed-loop supply chain model composed of manufacturers, retailers, and network recycling platforms. Based on the influence of customer bargaining behavior, we studied several different scenarios of centralized decision-making, decentralized decision-making, and contract coordination, using the Stackelberg game theory. The results show that retailers and network recycling platforms will reduce the direct recovery prices to maintain their own profit when considering the impact of consumer bargaining behavior, while remanufacturers will improve the transfer payment price for surrendering part of the profit under revenue and the expense sharing contract. Using this contract, we can achieve supply chain coordination and eliminate the effect of consumer bargaining behavior on supply chain performance. It can be viewed from the parameter sensitivity analysis that when we select the appropriate sharing coefficient, the closed-loop supply chain can achieve the same system performance under a centralized decision.

Swift trust and commitment: The missing links for humanitarian supply chain coordination?

Coordination among actors in a humanitarian relief supply chain decides whether a relief operation can be or successful or not. In humanitarian supply chains, due to the urgency and importance of the situation combined with scarce resources, actors have to coordinate and trust each other in order to achieve joint goals. This paper investigated empirically the role of swift trust as mediating variable for achieving supply chain coordination. Based on commitment-trust theory we explore enablers of swift-trust and how swift trust translates into coordination through commitment. Based on a path analytic model we test data from the National Disaster Management Authority of India. Our study is the first testing commitment-trust theory in the humanitarian context, highlighting the importance of swift trust and commitment for much thought after coordination. Furthermore, the study shows that information sharing and behavioral uncertainty reduction act as enablers for swift trust. The study findings offer practical guidance and suggest that swift trust is a missing link for the success of humanitarian supply chains.

Contract Design and Supplier Quality Management under Asymmetric Information

This paper investigated how to design contract models under asymmetric information to manage supplier quality and achieve supply chain coordination. We employed game theory to design contract models: optimal contracts in centralized control situation, profit margin contract and profit sharing contract in decentralized control situation. Under asymmetric information, the manufacturer designed optimal contract to manage supplier quality and to achieve coordination. The numerical analyses show that profit sharing contract is an optimal decision and coordination mechanism in decentralized control situation.

Coordination in a Single‐Supplier, Multi‐Retailer Distribution System: Supplier‐Facilitated Transshipments

We consider supplier‐facilitated transshipments for achieving supply chain coordination in a single supplier, multi‐retailer distribution system with non‐cooperative retailers. The previous transshipment literature has focused on coordination through retailer‐negotiated transshipments and thus does not consider the supplier's decision‐making. In contrast, in this study, we assume the supplier is an active participant in the system and we seek to understand how the supplier can facilitate the implementation of coordinating transshipments. We study a two‐period model with wholesale orders at the start of the first period and preventive transshipments performed at the start of the second period. Inspired by a supplier‐facilitated transshipment scheme observed in practice, we assume the supplier implements transshipments through a bi‐directional adjustment contract. Under this contract, each retailer can either buy additional inventory from, or sell back excess inventory to, the supplier. We show that coordination can be achieved through carefully designed contracts with state‐dependent adjustment prices and a wholesale price menu. We demonstrate that the supplier's role in facilitating coordinating transshipments is critical. In addition, we use our understanding of the coordinating contract form to derive some simpler and easier‐to‐implement heuristic contracts. We use a numerical study to demonstrate the value, to the supplier, of using the coordinating adjustment and wholesale prices, and to evaluate the heuristics’ performance.

A study on supply chain investment decision-making and coordination in the Big Data environment

In the Big Data environment, aims of enterprises investing in Big Data are to gain Big Data information (BDI). To study the decision-making issues of BDI investment and its effects on supply chain coordination, a supply chain with one retailer and one manufacturer was chosen. Meanwhile, considering a company owned the internal BDI and the external BDI, the market demand function was revised and four decision models were proposed from a new perspective. Then, the effects of BDI investment on supply chain members’ benefits under the four models were analyzed and an effectively coordination tactic was presented for achieving supply chain coordination. Results indicated when the investment cost could face a certain threshold, the retailer or the manufacturer investing in BDI could increase its benefits. Meanwhile, there existed “positive externalities” for other supply chain members. In addition, after supply chain members investing in BDI together, revenue-sharing contract could coordinate the supply chain effectively. This article provided a theoretical guidance or a decision basis for companies investing in BDI, meanwhile, it had reference values for supply chain coordination after investing in BDI.

Quick response strategy with cleaner technology in a supply chain: coordination and win-win situation analysis

Quick response strategy (QRS) has been widely adopted in a supply chain where members collect timely market information for better forecasting, and then respond promptly to the market changes by adjusting initial inventory decision. After adopting the QRS, sustainability issues such as greenhouse gas emission and energy waste may be more serious as production lead time is shorter. In this study, due to this dilemma, we develop a two-stage quick response supply chain with cleaner technology, where the manufacturer determines the cleaner technology investment and afterwards the retailer decides the ordering quantity. Based on Bayesian theory, we depict an information updating process for the QRS with cleaner technology. First, we find that the inventory service level significantly affects both manufacturer’s and retailer’s performance under the QRS with cleaner technology. Moreover, our analytical results indicate that the performance of centralised supply chain system is always better than the decentralised one. As a result, we propose two supply chain contracts, minimum ordering quantity (MOQ) and MOQ with buyback (MOQ-BB) to achieve supply chain coordination. Comparing with the MOQ, the MOQ-BB is more flexible to allow better allocation of the ‘additional’ expected profit between the channel members through the buyback price negotiation.

Coordination of Supply Chain under the Revenue Sharing-Advertising Cost Sharing Contract

In this article, we study a two-echelon supply chain with a single manufacturer and a single retailer. In the case of advertising investment affecting the market demand, we use the theory of game theory, and respectively discuss the coordination of general revenue sharing contract and revenue sharing-advertising cost sharing contract. The results show that: the general revenue sharing contract cannot achieve supply chain coordination. However, revenue sharing-advertising cost sharing contract in a specific form can achieve supply chain coordination. And in the appropriate revenue sharing contract parameters, it can also achieve a win-win situation between the two sides.

Wholesale price contract under fairness preference with random capacity and random demand

This paper investigates the effect of fairness preference on a dyadic supply chain with random capacity and random demand. Based on disadvantageous inequity aversion and advantageous inequity aversion, we establish the models of wholesale price contract with random capacity and stochastic demand. The retailer’s optimal ordering quantity is obtained. In addition, the impact of inequity aversion on the optimal order quantity and the supply chain coordination are also analyzed. We finally present numerical examples to illustrate the theoretical results. The results show that the wholesale price contract can’t achieve supply chain coordination for the risk-neutral retailer. However, when the retailer has extreme advantageous inequity aversion, the wholesale price contract can improve the profit of the whole supply chain and coordinate the supply chain.

Inconsistency of a retailer's optimal policies and channel performance under revenue sharing contracts

In this paper, a one-retailer and two-manufacturer supply chain is modeled by incorporating both revenue sharing contracts and product substitution (i.e., two products from different manufacturers) to investigate their effects on supply chain decisions and performance. First, we independently derive the retailer's optimal ordering policy and retail pricing policy for two products and identify the dynamic inconsistency phenomenon in the retailer's optimal retail pricing policies. Second, we analyze the effect of product substitution and revenue sharing coefficients on the retailer's decisions. Through a comparative analysis of two scenarios (i.e., independent and integral decision making for the two products), we quantify the difference in the retailer's optimal decisions. In addition, we find that a larger substitution rate results in a larger retail price difference between two products. Third, we provide the manufacturers' optimal decisions under a Nash equilibrium and show that revenue sharing contracts can achieve supply chain coordination and Pareto improvement.

Sub-Supplier's Decision Affect Supply Chain Performance

This paper studies how transfer pricing schemes interact with sub suppliers' opportunistic behaviors to affect supply chain performance. Effective supply chain management requires careful consideration of sub-suppliers', especially with respect to transfer pricing issues. Firms increasingly approach their sub-suppliers to drive compliance with firms' defined transfer pricing schemes. The paper models the supply chain incorporating asymmetric information among all the parties, supplier's innovation activities, sub suppliers' corruption possibility, and transfer pricing schemes. It examines the impact of various transfer pricing schemes on supply chain efficiency. Specifically, it conducts a performance comparison between the variable-cost transfer pricing scheme and the full-cost transfer pricing scheme. The paper finds that the sub supplier's choice of a transfer pricing scheme affects the supplier's sourcing decisions and the supply chain performance, and the variable-cost transfer pricing scheme performs better in achieving supply chain coordination. Therefore, the present research seeks to explore and increase one's understanding of critical factors that contribute to overcome aforementioned complexities and unique challenges of managing sub-suppliers for transfer pricing schemes. The present research expands on the theory of transfer pricing schemes and sub-supplier management context.

Design outsourcing in the fashion supply chain: OEM versus ODM

Design innovation is the engine of fashion. Many fashion firms outsource design innovation to their suppliers. Design outsourcing is on the rise in the fashion supply chain, but research in this area lags behind industry practice. In this paper, we examine how design outsourcing affects the supply chain, and we compare supply chain performance under an Original Equipment Manufacturer (OEM) strategy versus an Original Design Manufacturer (ODM) strategy. We evaluate a market size outsourcing model where design enhancement influences market size, and a success probability outsourcing model where design enhancement influences the success probability of innovation. We find that when the supplier trades with the retailer via a wholesale price contract under the ODM strategy, the supplier has no incentive to invest in innovation. In the market size outsourcing model, the design innovation in the centralized supply chain is higher than that under the OEM strategy. However, in the success probability outsourcing model, the success probability of innovation under the OEM strategy is higher than that in the centralized supply chain. Furthermore, we find that a profit sharing contract can achieve supply chain coordination under both OEM and ODM strategies; whereas, revenue sharing and buyback contracts cannot.

A Decision-Making Model of Low-Carbon Supply Chain Based on Government Subsidy

In order to study the role of government subsidy in a low-carbon supply chain, a two-stage game model for the subsidy of low-carbon technology and the subsidy of recycling is built. And the optimized subsidy strategy under the two kinds of subsidy policies is obtained. This paper also studies the impacts of carbon emission abatement, subsidy and the factors of subsidy on the supply chain and the government, so as to compare the two kinds of subsidy strategy. This study shows that the coefficient of environmental benefits has a positive impact on the two kinds of subsidy. The subsidy can stimulate the carbon emission abatement, and the fixed cost has a negative impact on the will of the carbon emission abatement for the enterprises. Besides, the low-carbon preference of the consumers has a positive impact on the carbon emission abatement under the subsidy of low-carbon technology. Furthermore, the government under takes the main costs of the low-carbon technology under the subsidy of low-carbon technology. The environmental benefit also has a positive impact on the subsidy and profits of the government and the profits of the supply chain under the recycling subsidy. Both kinds of subsidy strategies can achieve supply chain coordination.

Research on Buy-Back Contract in Supply Chains Based on Mental Accounting Theory

Adopting the concept of mental accounting, the paper analyzes loss-aversion retailer’s optimal order quantity under buy-back contract in the two-stage supply chain, and proves the existence and uniqueness of the optimal order quantity. Conclusions show: under the certain degree of loss aversion, there exists a unique repurchase price to achieve supply chain coordination; meanwhile, the system’s optimal order quantity decreases with the retailer’s loss aversion and increases with the buy-back price.

Coordinating contracts for supply chains that market with mail-in rebates and retailer promotions

Marketing promotions are pervasive in industry, yet too often they are introduced without regard to their potential impact on the whole supply chain. This paper considers a cooperative business environment where a manufacturer and a retailer work interactively in determining their independent sales promotional actions. We use a newsvendor-modelling framework to study coordinating issues when the manufacturer provides mail-in rebates directly to consumers while the retailer exerts promotional effort to further spur consumer demand. We find that quantity discount contracts in conjunction with buy-back achieve supply chain coordination. Successful coordination can result in significant supply chain improvement, which leads the retailer to order more units and exert higher promotional effort level. With numerical examples, we provide additional insights on the conditions for the manufacturer to offer rebates.