Centralized Supply Chain Research Articles

Optimal Variety and Pricing Decisions of a Supply Chain With Economies of Scope

Motivated by observations that consumers demand product variety and scope economies or diseconomies for multiple products are prevalent, we develop two supply chain models under different channel leaderships, namely the retailer(-led) Stackelberg (RS) model and manufacturer(-led) Stackelberg (MS) model, to address the issues on product variety and pricing. In the RS case, we find that if it is not too costly to increase variety, the manufacturer's profit increases with diseconomies of scope, and it is optimal to provide a greater variety than the variety just covering the market under the centralized supply chain, while the decentralized supply chain provides a variety level just covering the market; however, the variety under the decentralized supply chain is greater than that under the centralized system. In addition, a higher shelf cost for the retailer strengthens the double marginalization effect. For the MS model, when we compare it with the RS model, we find that the retail price under the MS model is higher than that under the RS model, while the variety level under the MS model is higher when scope economies exist and whether variety and channel profit under the MS model are higher highly depends on shelf cost and marginal variety cost.

Coordinating a Dual-Channel Supply Chain Under Equal-price Mechanism When Demand Disruption Occurs

This paper studies a two-stage dual-channel supply chain composed of one manufacturer and one traditional retailer. The manufacturer has its own online channel when he sells its product to the offline retailer. There exists a Stackelberg game between the manufacturer and the traditional retailer, in which the manufacturer is the leader and the traditional retailer is the follower. The manufacturer sets the online retail price which is the same as the offline retail price. When the supply chain is in static (undisrupted) scenario, its Pareto improvement can be obtained and it can be coordinated by the two-part-tariff contract with one-time transfer payment. When disruptions make the market scale change, the supply chain performance such as the optimal retail price, the optimal production quantity and the optimal total supply chain profit under different demand disruptions in the centralized supply chain can be obtained. Then, we find that there exists certain robustness in the manufacturer’s production quantity. When the supply chain is decentralized, the supply chain coordination can be obtained by changing the wholesale price and one-time transfer payment according to different disruption levels. Finally, some numerical examples are presented to illustrate the results.

Effective Price Policy in the Centralized Supply Chain Spare Parts

The paper considers the problem of management of logistics based on a centralized scheme. The problem is the definition of agreed prices, which on the one hand, provide maximum income an organization engaged in the supply side (center), and on the other - make more profitable for consumer organizations use a centralized scheme. In the game setting, consumers can change their proposed price. This creates the situation of the game. When profitability of centralized procurement scheme consumers competes for inclusion in the centralized scheme that encourages them to reduce the prices offered.

Range contracts: Risk sharing and beyond

Abstract We introduce and study the range contract, which allows a buyer to procure from a supplier at a prescribed price any amount within a specified range. In return, the supplier is compensated up front for the width of the range with a range fee . This fee can be viewed as the buyer trading monetary value for reduced uncertainty. The range contract generalizes and unifies many common contracts, such as fixed-price, JIT, option, and quantity-flexibility contracts. The parameters that maximize the expected profit of the centralized supply chain are derived here and are shown to crucially depend on production flexibility. We also study here the buyer’s expected profit-maximizing range endpoints as a function of the pricing parameters of the contract. Using the buyer’s optimal range, we demonstrate how the supplier can set the contract’s pricing parameters so as to maximize the supplier’s expected profit for a uniform distribution of demand. We provide computational evidence, for uniformly distributed demand, that the range contract allows the optimal decentralized supply chain to attain significant reductions in standard deviation of profit in exchange for moderate reductions in expected value of profit. We further demonstrate computationally that both the buyer and supplier can benefit simultaneously, attaining higher risk-adjusted profits than the centralized supply chain.

Pricing and Inventory Strategy of Dual-channel Supply Chain under Random Demand and Retailer's Capital Constraint

A dual-channel supply chain system composed of one manufacturer and one retailer is considered in this paper, which existed uncertainty demands in both distribution channels and capital constraint on retailer. It set up the profit model of manufacturer dominated dual-channel supply chain system, studied to the optimal pricing and inventory strategies of decentralized and centralized supply chain, obtained the optimal pricing and inventory strategy of the two kinds of supply chain system. The analysis to the optimal solution indicated that the demand uncertainty of two distribution channels, deferred-payment rate etc, are all have certain influence relation on the pricing strategies of manufacturer and retailer. Numerical experiment has showed the effectiveness of the conclusions.

Effect of Trade Promotion in Centralized and Decentralized Supply Chain: Wholesale Price Experiment

Effect of Trade Promotion in Centralized and Decentralized Supply Chain: Wholesale Price Experiment

The Supply Chain Contract Design under Cap-and-Trade Mechanism with Free Riding

This paper studies the influence of free riding on enterprise product pricing and carbon emissions reduction investment, as well as the contract design to achieve supply chain coordination under the carbon trading mechanism. First, we discuss the situation where carbon emissions reduction investment affects the product price and income. It demonstrates that the optimal investment of the upstream manufacturer increases with the degree of the free riding of the downstream manufacturer. The upstream manufacturer can improve their carbon reduction invest- ment and the whole supply chain achieves Pareto improvement when the investment cost sharing contract is introduced. Nevertheless, under the cost-sharing contract the optimal investment of the decentralized supply chain is still lower than that of the centralized supply chain, and only in some particular cases can the two types of supply chain achieve equal total profits. Then, we preliminarily explore the situation where the product price and income is influenced by carbon emissions reduction investment. The consequences indicate that the optimal investment of the upstream manufacturers in this situation is less than the former one's, and the transfer payment mechanism is able to improve the level of the supply chain overall carbon emissions-reduction. Moreover, compared to the former situation, the effects of free riding of the downstream manufacturer are even more serious. The conclusions can provide some intellectual support for manufacturing enterprises to make reasonable emissions reduction strategies and coordinate the supply chain existing in free riding.

Supply chain coordination via a two-part tariff contract with price and sales effort dependent demand

Article history: Received March 15, 2014 Accepted September 6, 2014 Available online September 9 2014 This paper studies the channel coordination between a supplier and a retailer with price and sales effort dependent demand. By means of game theory, we analyze price and sales effort decisions of the centralized supply chain. Then we consider three different contracts under decentralized model, i.e., wholesale price contract, cost-sharing contract and a two-part tariff contract, in which the supplier offers a contract comprising a wholesale price and a lump-sum fee to the retailer to coordinate the supply chain. Finally, we analyze the results to compare the equilibrium decisions under different contract scenarios. Our results show that both the wholesale price contract and the cost-sharing contract cannot coordinate the supply chain while the two-part tariff contract can effectively coordinate the supply chain. © 2015 Growing Science Ltd. All rights reserved.

An experimental study on the effects of minimum profit share on supply chains with markdown contract: Risk and profit analysis

Supply chain performance measures include both profit and risk. In this study, we examine the effect of retailers’ minimum profit share concerns on supply chain system performance through laboratory experimental and analytical modeling approaches. In the experiment, each retailer’s minimum profit share, which partially reflects her self-serving fairness concern, is measured with a parameter defined as the minimum profit share ratio (MPSR), which is the ratio of the retailer’s profit to the whole supply chain profit. We specifically consider a two-stage supply chain in which a supplier offers a take-it-or-leave-it markdown contract to a retailer who has an MPSR concern. In our laboratory experiment, the role of the supplier is played by human subjects who are practitioners in the fashion industry; to ensure that the MPSR concept is fully implemented, the role of the retailer is played by the computer. Mirroring the observed industrial practice, the markdown price is defined as a fixed percentage of the wholesale price, and the supplier needs to decide on a wholesale price. Our empirical results show that when the MPSR increases, the supplier’s average profit and absolute risk decreases, whereas those of the retailer increase. As for the whole supply chain, our experiments suggest there is an inverse U-shaped relationship between the supply chain profit and the MPSR; thus the presence of an MPSR concern leads to a higher supply chain risk (both in absolute and relative terms). We also observe that when the retailer tends to split the supply chain profit equally with the supplier (MPSR=0.5; in this case, neither party faces disadvantageous inequality), the whole supply chain achieves the best performance, and the supply chain profit is close to the theoretically optimal one (the centralized supply chain profit). In other words, a fair retailer helps to create a sense of cooperation between the supplier and herself.

The Study of Product Availability in a Dual-channel Distribution Supply Chain with (Q, R) Policy of Retailer

The paper focus on the supply chain model with a single product in electronic and retail channel, only a supplier and a retailer in system, customers have alternatives to choose the channel that is better suited to their needs, some of them may alternatively switch to the other channel when a stock-out occurs in their preferred channel. Supplier and retailer implement one-for-one and (Q, R) ordering policies respectively to replenish their inventories. We set up the profit model of supply chain by Markov process, and study the product availability of supply chain. The result shows that the stock-out based substitution rate may increase or decrease the efficiency of decentralized supply chain; the centralized supply chain can adjust the based-stock levels timely to different stock-out based substitution rate and benefit from it, the supplier and retailer in a decentralized supply chain are more inattentive to customers’ stock-out based substitution rate, and prone to lose their benefits.

Integrated pricing and lot-sizing decision in a two-echelon supply chain with a finite production rate

In this paper, we consider a supply chain consisting of a supplier and a retailer selling the product manufactured by the supplier in a market, in which the demand for the product is decreasing in the price set by the retailer. Previous research on coordinating the supply chain with price-sensitive demand often assumes that either the supplier purchases the product or the supplier has an infinitely large production rate. We consider explicitly the supplier’s finite production rate in the pricing and lot-sizing decision, which causes the problem much more challenging. We first investigate the optimization problem in the decentralized scenario to find the optimal order quantity and selling price for the retailer as well as the optimal wholesale price and lot size multiplier for the supplier. We then solve the joint optimization problem in the centralized supply chain to find the optimal order quantity, the selling price, and the optimal lot size multiplier. We provide two sequential algorithms to solve the joint optimization problem. Computational experiments show that the algorithms are effective (all 448 tested problems are solved optimally) and efficient (it only takes a few iterations to converge for each tested problem). The supply chain coordination mechanism is then designed through an all-unit quantity discount policy and a franchise fee.

The Impact of Modular Assembly on Supply Chain Efficiency

This article studies the impact of modular assembly on supply chain efficiency. In the modular assembly approach, a manufacturer acquires pre‐assembled modules from its suppliers, rather than the individual components, as in the traditional assembly approach. We analyze the competitive behavior of a two‐stage modular assembly system consisting of a manufacturer, and a supplier who pre‐assembles two components into a module. The firms can choose their own inventory policies and we show the existence of Nash equilibrium in the inventory game. Moving from the traditional to the modular approach has a twofold effect on the supply chain. First, we investigate the effect of centralizing the component suppliers. It can be shown that when there is no production time shift, the module supplier always holds more component inventories than suppliers do in the traditional approach, which yields a lower cost for the manufacturer. However, the suppliers, and therefore the supply chain may incur a higher cost in the modular approach. Second, we study the effect of a shift in production time from the manufacturing stage to the supplier stage. From numerical studies, it has been found that such a lead time shift always benefits a centralized supply chain, but not necessarily so for a decentralized system. Combining the two effects, we find that the modular approach generally reduces the cost to the manufacturer and the supply chain, which explains the prevalence of modular assembly from the perspective of inventory management. These results also provide some insight into how firms can improve supply chain efficiency by choosing the right decision structure and lead time configuration.

Impact of RFID technology on supply chain decisions with inventory inaccuracies

Inventory inaccuracies are costly and prevalent in many industries. This paper focuses on the impact of RFID technology adoption on supply chain decisions with shrinkage and misplacement problems in the Internet of Thing (IoT). We assume that the supply chain consists of one supplier and one retailer that sell a single product to the customer. By assuming that demand is uniformly distributed, and considering the factors of the fixed investment cost, tag price and shrinkage recovery rate, both RFID and non-RFID cases are analyzed under two scenarios: (1) in the centralized supply chain, the Newsvendor model is applied to investigate the impact of applying RFID technology on inventory control policy and supply chain profit; (2) in the decentralized supply chain, the wholesale price contract is formulated to characterize the supply chain partners’ decisions on ordering quantity, wholesale price and profits. We find that when the fixed cost and variable tag cost of RFID technology are shared between the retailer and the manufacturer, the retailer is much more sensitive than the supplier to the sharing proportion of RFID fixed investment cost as well as the tag price.

The Research of the Lead Time and the Profit in Centralized Dual-Channel Supply Chain

Internet has changed customers’ consumption patterns a lot. And it also has changed the manufactures’ sale model. These phenomena bring us reformation and challenge. In direct channel, price is always cheaper than that in traditional channel and we can get much profit. Empirical studier shows that lead time is one of the major factors influencing consumer acceptance. A short lead time can increase the logistics, but the long lead time will reduce customers’ acceptance and the loyalty. Therefore, researching the lead time and the profit is important for dual-channel. In this paper, we study the lead time in centralized dual-channel supply chain and its impact on profit. We build the dual-channel supply chain model including quoted lead time and examine the relationship about the lead time, profit and

Quick response and supply chain structure with strategic consumers

This work explores the impact of quick response on supply chain performance for various supply chain structures with strategic customer behavior. By investigating pricing and inventory decisions in decentralized supply chains under revenue-sharing contracts and in centralized supply chains, we study the performance of four various systems and compare the value of quick response in different supply chain structures. The results show that if the extra cost of quick response is relatively low, the value of quick response would be greater in centralized systems than in decentralized systems. On the other hand, if the extra cost is high, decentralized supply chains reap more incremental profits from adopting quick response. We also find that revenue-sharing contracts enable a decentralized supply chain to outperform a centralized supply chain, but only allow limited flexibility of allocating total profits between a manufacturer and a retailer.

Study on Supply Chain Disruption Management under Service Level Dependent Demand

This paper studied pricing, service level, and production quantity decision problems in a supply chain with one manufacturer and one retailer under demand and production cost disruptions. The joint impact of demand and production cost disruptions on optimal pricing, service level, and production decisions in centralized and decentralized supply chain was analyzed, respectively. By solving the optimization problem, the optimal decisions of the supply chain were obtained under different demand and production cost disruptions scenarios. It is found that the original production quantity and demand-stimulating service level exhibit some robustness under disruptions in both centralized and decentralized supply chains, while the original optimal pricing does not. In centralized supply chains, it is always beneficial for the central decision-maker to knowing of the accurate information of disruptions. However, sharing disruption information is not always beneficial for both the manufacturer and retailer in decentralized supply chain.

An Investigation on Centralized and Decentralized Supply Chain Scenarios at the Product Design Stage to Increase Performance

Design for supply chain has become an essential consideration while designing a new product. Previous studies pointed out that early supplier involvement can contribute to the success of the product development and enhance the competitive advantage of the enterprise. However, most of the studies coordinating supplier selection and supply chain configuration make these decisions during the detail design stage, which is the last phase of product design. This research aims to investigate the supply chain scenarios for their relevant performance at the conceptual design stage. The performance of different supply chain scenarios (i.e., centralized and decentralized), are compared and discussed. The results show that the decentralized supply chain scenario is advantageous for the time performance of the supply chain network, whereas the centralized supply chain scenario demonstrates superiority on the cost performance.

Sustainability investment under cap-and-trade regulation

Carbon emission abatement is a hot topic in environmental sustainability and cap-and-trade regulation is regarded as an effective way to reduce the carbon emission. According to the real industrial practices, sustainable product implies that its production processes facilitate to reduce the carbon emission and has a positive response in market demand. In this paper, we study the sustainability investment on sustainable product with emission regulation consideration for decentralized and centralized supply chains. We first examine the order quantity of the retailer and sustainability investment of the manufacturer for the decentralized supply chain with one retailer and one manufacturer. After that, we extend our study to the centralized case where we determine the production quantity and sustainability investment for the whole supply chain. We derive the optimal order quantity (or production quantity) and sustainability investment, and find that the sustainability investment efficiency has a significant impact on the optimal solutions. Further, we conduct numerical studies and find surprisingly that the order quantity may be increasing in the wholesale price due to the effects of the sustainability and emission consideration. Moreover, we investigate the achievability of supply chain coordination by various contracts, and find that only revenue sharing contract can coordinate the supply chain whereas the buyback contract and two-part tariff contract cannot. Important insights and managerial implications are discussed.

Vendor managed inventory models for single-vendor multi-retailer supply chains with quality consideration

In this paper, quality of items is incorporated in two VMI models for a single-vendor multi-retailer supply chain. The first model is for a decentralised supply chain where the vendor’s expected profit is maximised. The other model, however, is for a centralised supply chain where the expected system profit is maximised. It is assumed that the lot received by vendor contains a random number of nonconforming items and, thus, inspection is performed on the incoming lot before it is delivered to retailers. In addition, we assume that nonconforming items are sold as a single batch to a secondary market at a reduced price. We also assume that the inspection process is perfect and is performed at a finite rate. In the proposed models, we incorporate a VMI contract which includes an upper limit on retailer’s inventory level. In order to encourage cooperation between vendor and retailers, we propose a scheme that distributes the extra profit obtained by the integrated solution between the vendor and retailers.

The Economic Potential of Brewer’s Spent Grain (BSG) as a Biomass Feedstock

This paper analyzes a pro-forma economic market and supply chain system for the reuse of a lignocellulose (brewer’s spent grain) in an industrial biotechnology environment. An extant literature review was conducted, followed by a technical analysis of BSG, and the development of a supply chain system and economic market analysis based upon a participant brewing company and industry experts. In this paper, it was found that, even with the potential for future improvements in the conversion of brewer’s spent grain (BSG) from an efficiency standpoint, this industrial residual is supply chain prohibitive as a biofeedstock in comparison to other lignocellulose materials, therefore, centralized market relationships would not be advantageous for sellers and buyers. Future research should consider the viability of centralized supply chain structures for alternatives that may exist as future bio-feedstocks.