Centralized Supply Chain Research Articles

Centralized Supply Chain Network Ddesign: Monopoly, Duopoly, and Ooligopoly Competitions under Uncertainty

This paper presents a competitive supply chain network design problem in which one, two, or three supply chains are planning to enter the price-dependent markets simultaneously in uncertain environments and decide to set the prices and shape their networks. The chains produce competitive products either identical or highly substitutable. Fuzzy multi-level mixed integer programming is used to model the competition modes, and then the models are converted into an integrated bi-level one to be solved, in which the inner part sets the prices in dynamic competition and the outer part shapes the network cooperatively.Finally, a real-world problem is investigatedto illustrate how the bi-level model works and discuss how price, market share, total income, and supply chain network behave with respect to key marketing activities such as advertising, promotions, and brand loyalty.

Centralized Decisions for a Two-Stage Supply Chain with Price-Discount Dependent Demand

Abstract In this paper, we study a centralized supply chain for a two-stage with selling price discount. This supply chain consists of a supplier and a retailer. Based on the feature that the product’s selling season is short and the supply chain faces great demand uncertainty. We consider a two-stage scenario where, at the beginning of stage 1, the supplier reserves production capacity based on historic data in advance, stage 2 comes to us after some leadtime, both the supplier and the retailer update the demand information, the retailer then places an order not exceeding the reserved capacity based on the selling-pricing discount dependent demand. We make optimal decisions on the reserved capacity in stage 1, selling price discount and order quantity in stage 2. In this supply chain, the pattern in stage 2 is figured out first, and then stage 1 is cleared as well. Then we present a numerical example to give some insights. Finally we get some conclusions.

Procurement and coordination under imperfect quality and uncertain demand in reverse mobile phone supply chain

The extremely short life cycles and rapid advent of new technologies are placing used phones at the forefront of reverse supply chain management. This research focuses on the incentive mechanisms in a supply chain of used mobile phones that are still usable and thus can be sold at a lower price to secondary markets where customers are more price-sensitive. Through an in-depth case study, we first explored the second-hand mobile phone supply chain structure and operational procedure. Then we investigated and compared two different incentive strategies between a take-back enterprise (referred to as a “distributor”) and a supplying firm with large quantities of used phones (referred to as a “supplier”), namely quantity discount scheme and coordinated quality improvement. The optimal order quantities and/or quality improvement levels are analyzed in both decentralized and centralized settings. Our results show that the quantity discount scheme may result in a centralized optimization, while the quality improvement scheme could benefit the entire supply chain when the initial imperfect ratio is not low. Moreover, the value of quality improvement decreases with the demand uncertainty under a decentralized system but increases in a centralized supply chain. This research provides an effective tool and guideline for evaluating different procurement and incentive strategies in reverse mobile supply chain management.

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.

Investment decision-making and coordination of a three-stage supply chain considering Data Company in the Big Data era

In the Big Data era, Data Company as the Big Data information (BDI) supplier should be included in a supply chain. To research the investment decision-making problems of BDI and its effects on supply chain coordination, a three-stage supply chain with one manufacturer, one retailer, and one Data Company was chosen. Meanwhile, considering the manufacturer contained the internal BDI and the external BDI, four benefit models about BDI investment were proposed and analyzed in decentralized and centralized supply chains. Meanwhile, a revenue sharing contract was used to coordinate the decentralized supply chain after investing in BDI. Findings: (1) the Big Data investment threshold of the Data Company was determined by the cost improvement coefficient, meanwhile, Data Company’s benefit was influenced by the consumer preference information conversion coefficient. (2) Whether the manufacturer was suitable to invest in BDI, it was influenced by the cost improvement coefficient. (3) When revenue sharing coefficient could meet a certain range, the revenue sharing contract could make the supply chain coordinate. Moreover, the benefits of supply chain members were same after coordination.

Effects of human errors and trade-credit financing in two-echelon supply chain models

This paper develops two centralised two-echelon supply chain models with the trade-credit financing and inspection errors. Both models follow a single-setup-multi-delivery (SSMD) policy and each delivery is designed using the just-in-time (JIT) method to increase the efficiency of the supply chain. In first model, the random defective rate is assumed and each delivered item goes through inspection process at the buyer's end due to the contract with vendor, because vendor gives a trade-credit support to buyer. In second model, human errors of Type I and Type II are considered due to tiredness and ignorance of the inspector during inspection process. The joint annual cost of supply chain is minimised with respect to order quantity and number of shipments. Finally, some numerical examples, sensitivity analysis, and graphical representations are given to illustrate more savings from existing literature. [Received 13 December 2015; Revised 19 June 2016; Accepted 28 June 2016]

Channel Coordination Among a Manufacturer and a Retailer in Two-Layer Supply Chain

The purpose of the present paper is to analyze the channel coordination of a manufacturer and a retailer when demand is stochastic and dependent on the promotional effort. The manufacturer produces goods and delivers to the retailer prior the selling session. Then the retailer sells the items during the selling session. Both the members of the supply chain make their expected profits by trading off sales revenues, cost for promotional effort and discount on sales price. The optimal economic order quantity and optimal promotional effort are determined simultaneously in the proposed paper with return policy and without return policy considering stochastic nature of demand in a centralized supply chain as well as in a decentralized supply chain. An analytical solution has been obtained to determine the optimal contract parameters of the channel. The optimal solution of the problem is illustrated with the help of numerical examples.

Price and warranty competition in a supply chain with a common retailer

ABSTRACTBesides pricing strategy, warranty strategy becomes another important tool of competition for firms in manufacturing industries in recent years. In this context, this paper studies price and warranty competition problems in a supply chain with two manufacturers and one common retailer. The two manufacturers produce two substitutable products; one has high quality and the other has low quality. Mathematical models are developed to analyse these competition problems under four market structures: one centralized supply chain and three decentralized supply chains (i.e. Nash game, manufacturer-leading Stackelberg game and retailer-leading Stackelberg game). We find that the consumers’ sensitivity to warranty period plays an important role in the competition. As this sensitivity increases, the profits of the manufacturer with high-quality product and the retailer increase. However, as this sensitivity increases, whether the profit of the manufacturer with low-quality product increases or decreases depends on the magnitude of the product substitutability. The total profit of the supply chain increases in the consumers’ sensitivity to warranty period. Moreover, the manufacturer with high-quality product earns more than its rival when the sensitivity is low, and earns lower than its rival when the sensitivity is high.

Pricing and branding for remanufactured fashion products

In recent years, we have witnessed the start-up of many fashion companies which collect, recycle and sell remanufactured fashion products. This paper explores this particular business operation with respect to their optimal pricing and brand investment decisions. By exploring a stylized basic analytical model, we derive the closed form analytical optimal decisions and explore how they vary with different major model parameters. We uncover that compared to the centralized supply chain optimal decisions, the fashion retailer will over-price the remanufactured fashion product and under-invest on branding under the decentralized setting. A coordination mechanism is hence proposed to help. The situations under which the fashion retailer should set the remanufactured product's price higher than the new product's price are determined. Furthermore, we prove analytically that the presence of a government sponsor for remanufacturing is beneficial to the consumers. Finally, an alternative model with a multiplicative branding effect is investigated. It is interesting to note that the findings obtained under the basic model are still true under the alternative model. Managerial implications and future research are discussed.

Supply chain contracting coordination for fresh products with fresh-keeping effort

PurposeFresh product loss rates in supply chain operations are particularly high due to the nature of perishable products. The purpose of this paper is to maximize profit through the contract between retailer and supplier. The optimized prices for the retailer and the supplier, taking the fresh-keeping effort into consideration, are derived.Design/methodology/approachTo address this issue, the authors consider a two-echelon supply chain consisting of a retailer and a supplier (i.e. wholesaler) for two scenarios: centralized and decentralized decision making. The authors start from investigating the optimal decision in the centralized supply chain and then comparing the results with those of the decentralized decision. Meanwhile, a fresh-keeping cost-sharing contract and a fresh-keeping cost- and revenue-sharing contract are designed. Numerical examples are provided, and managerial insights are discussed at the end.FindingsThe results show that the centralized decision is more profitable than the decentralized decision; a fresh product supply chain (FPSC) can only be coordinated through a fresh-keeping cost- and revenue-sharing contract; the optimal retail price, wholesale price and fresh-keeping effort can all be achieved; and the profit of a FPSC is positively related to consumers’ sensitivity to freshness and negatively correlated with their sensitivity to price.Research limitations/implicationsThis research is based on the assumption that demand is relatively stable. It has not addressed when demand is stochastic.Practical implicationsThe findings would be useful for managers in fresh food sector in terms of how to deal with suppliers in order to maximize total profit while also provide freshest food to the customers.Originality/valueFew studies have considered fresh-keeping effort as a decision variable in the modelling of supply chain. In this paper, a mathematical model for the fresh-keeping effort and for price decisions in a supply chain is developed. In particular, fresh-keeping cost-sharing contract and revenue-sharing contract are examined simultaneously in the study of the supply chain coordination problem.

The impact of government incentive on the two competing supply chains under the perspective of Corporation Social Responsibility: A case study of Photovoltaic industry

Strategy Corporation Social Responsibility (CSR) has received a lot of attention lately and is mainly related to environmental protection in a single supply chain under the condition of the constant tax or subsidy imposed by government, this paper studies a price competition model of two environmentally friendly and harmful competing supply chains consisting of one manufacturer and one retailer respectively, adopting two-stage Stackelberg game under the condition of incomplete knowledge. Assume that the manufacturers don't know the retailers' knowledge, but they are aware of the prior probability of retailers about selling which type of product under the decentralized supply chain, and the higher the prior probability is, the more likely manufacturers tend to produce the environmentally friendly PV panels. This paper first quantifies the impact of products on the environment, studies the impact of which on competing supply chains' profit and the tariffs. This paper finds that only the tariffs set by government and the values of the environmental impact satisfy a three-dimensional area, can the firms ensure the stable competitive market. Results of this analysis show that government cannot impose extreme tax or subsidy on firms, and the environmental impact in the centralized supply chains is higher than that in the decentralized supply chains. This paper validates the results through a case of Photovoltaic (PV) industry from the perspective of CSR, and the numerical results show that there are significant impacts of different governmental policy of social responsibility and environment protection on the financial revenue and the profits of the competing supply chains and their members.

Cooperative advertising and ordering policies in a two-echelon supply chain with risk-averse agents

This paper considers a cooperative advertising and ordering issue in a two-echelon supply chain in which a risk-averse manufacturer sells a product through a risk-averse retailer. We assume that demand for the product is a random variable influenced by the manufacturer's global advertising and the retailer's local advertising. To stimulate demand for the product, the risk-averse manufacturer induces the risk-averse retailer to increase local advertising expenditure through cooperative advertising contracts. With the objective of maximizing conditional value-at-risk, models for determining the retailer's optimal order quantity and both agents’ advertising investments are developed for both centralized and decentralized settings. We reveal the effect of demand uncertainty and two agents’ risk aversion on both agents’ optimal advertising/ordering policies. Through both theoretical and numerical analyses, we find that: 1) the centralized scenario may perform worse than the decentralized one in many cases if the decision-maker of the centralized supply chain is more risk averse than its two participants; 2) whether the risk-averse manufacturer is willing to share the retailer's local advertising expenditure depends significantly on the degree of two agents' risk aversion; and 3) in the decentralized setting, it will be more beneficial for both agents that the leader is more risk averse than the follower. These new findings are further supplements to the results in the existing related literature.

Supply chain enterprise operations and government carbon tax decisions considering carbon emissions

The reduction of carbon emissions is a world-wide concern. Many countries have implemented various policies to reduce carbon emissions, which has affected the operational decisions of enterprises in the supply chain since most carbon is emitted during the production process. In this paper, the mutual relationship between supply chain enterprise operations and government policy are considered. Governmental carbon emission tax policies are examined using the three-stage Stackelberg game model with a decentralized supply chain and the two-stage Stackelberg game model with a centralized supply chain. The optimal strategies of enterprises and governments are theorized for both types of supply chains. In the decentralized supply chain, a product's retail price and the government's carbon tax are higher than those in centralized decision-making mode. In the centralized supply chain, the stocking factor of the retailer, the profit of the supply chain and the expected social welfare of the government are higher than those in decentralized supply chain. With the increase of carbon emissions tax, the wholesale price of manufacturer and retailing price of retailer under the decentralized supply chain, as well as retailing price of retailer under centralized supply chain increase. The results indicate that the centralized supply chain is more beneficial to enterprises and government than the decentralized supply chain. By performing the comparisons of the manufacturer-dominated supply chain with retailer-dominated and no agent dominated supply chains, it is shown that both the environment performance and financial performance of supply chain are better off when the supply chain members have distributed pricing powers.

Joint optimization of production, transportation and pricing policies of complementary products in a supply chain

In this paper, we consider the joint optimization of production, inventory, transportation and pricing policies in a multi-product two-stage supply chain. The products are complementary and their demands are not only dependent on their own price but also on their complementary product price. Mathematical model of the problem is presented in both centralized and decentralized supply chains. Exact algorithms are presented using mathematical and convexity analysis to solve mixed integer nonlinear models. Numerical studies show that the profit of centralized supply chain is more stable compared to decentralized supply chain when the dependency rate of products changes.

Impact of Retailers with Knowledge of Supplier's Inventory on Supply Chain Performance

We model a supply chain consisting of a supplier and multiple retailers facing deterministic demand. We denote some retailers as strategic in the sense that given the supplier inventory information, they will implement the optimal stocking policy by incorporating such information. On the other hand, some retailers are denoted as naïve in the sense that they ignore supply information and resort to a simplistic ordering policy. Naïve retailers learn the optimal policy over time and adjust their orders accordingly. We study the dynamics of this game and investigate the impact of such strategic and naïve retailers on the cost, ordering pattern and stocking policies of all parties. We analyze the supply chain under two scenarios: the centralized supply chain where the objective is to minimize the total supply chain cost, and the decentralized supply chain where each self‐interested player minimizes its own cost in a Stackelberg game setting. We fully characterize the optimal policies under both centralized and decentralized scenarios and show that, surprisingly, the supply chain might be better off by virtue of naïve retailers. The result is driven by the fact that strategic and naïve players’ decisions shift the positioning of inventory in the supply chain with its final impact being determined by the relative costs of different retailer‐types. Our results also offer managerial insights into how access to supply information can improve supply chain performance.

Contracting pricing and emission reduction for supply chain considering vertical technological spillovers

Under the environment of technological spillover, carbon abatement investment has become one of key factors on cutting reducing carbon emission, which includes production costs in the components and products. Based on demand with price elastic, we study a dyadic supply chain consisting of a retailer and a manufacturer to explore a two-echelon Stackelberg model for obtaining the optimal decisions of decentralized and centralized supply chain within the dominated manufacturer. With the coordination contract through revenue-cost sharing, setting the decentralized profits of players as the disagreement points, the manufacturer and the retailer can achieve the goal of centralized scenario, which can promote the members to increase the carbon abatement investment and decrease the retail pricing. Finally, by theoretical comparison and numerical analysis, the results show that technological spillovers amplify the impact of “free-ride” behavior, which the supplier always has incentives to reduce carbon emission, but the cooperation of players will achieve as well as improves the profits only when technological spillovers are large.

Retail Order-Taking Strategies Under Competing Trade Credit Policies With Varying Demands

This paper discusses optimal order-taking strategies under competing trade credit policies with varying demands. This study examines three decision-making scenarios, namely, (i) a centralized supply chain, (ii) a decentralized supply chain, and (iii) a coordinated supply chain with a buyback contract. Optimal decisions are obtained for each scenario. We find that if the average forecast value of credit sensitivity is higher than the real value, then the supply chain is at risk of having an overestimated performance; if the average forecast value of credit sensitivity is lower than the actual value, then the supply chain is at risk of having an underestimated performance. As the sensitivity of the credit competition increases, the supply chain’s performance decreases. The supply chain can be coordinated by a buyback contract.

Market segmentation and pricing strategies based on product platform

PurposeThe purpose of this paper is to examine the issue of optimal pricing strategies for two substitutable products from the same product platform and the effects of variations in product architecture.Design/methodology/approachThe authors design a product line which consists of two substitutable products and use a traditional market segmentation research framework to analyze the pricing and product design strategies.FindingsIt is concluded that profit tends to rise in a centralized supply chain at the expense of market share of the integral product. In a decentralized supply chain, one product will reduce its market share so as to enhance the degree of modularity. Although enhancing the extent of integration of a product will bring in more flexibility during the design of the product line, this will do so at the expense of the market share of the other product.Originality/valueThe authors find that the two products form a product line and share a common module belonging to the platform, so any changes in the modules (changes in product architecture) not only affect the product in question but also the other one in the product line.

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.

Supplier’s Joint Investments in Cost Reduction and Quality Improvement in a Decentralized Supply Chain

We consider a decentralized supply chain with a downstream manufacturer and an upstream supplier. The upstream supplier sells a product to the manufacturer, who faces a quality and price sensitive demand. The supplier has a chance to invest in both cost reduction and quality improvement of its product. We derive the optimal investment and pricing decisions for the supply chain members. We do so in both the centralized and the decentralized supply chains. We show that the optimal investment and pricing decisions in the decentralized supply chain may deviate from that in the centralized supply chain. We develop a mechanism to coordinate the decentralized supply chain. The developed mechanism contains four policies: wholesale price, sharing of revenue, sharing of cost reduction investment cost, and sharing of quality improvement investment cost. We also show that the developed coordination mechanism can lead to Pareto improvement.