Manufacturer-retailer Supply Chain Research Articles

Cause marketing decisions in supply chains: cause effect and marketing effect

This paper studies a cause marketing (CM) design problem incorporating donation amount, marketing expenditure, and product pricing as decision variables in a manufacturer-retailer supply chain context. We investigate five CM decision models: centralized supply chain conducting CM (Model C), manufacturer conducting CM (Model M), retailer conducting CM (Model R), manufacturer leading CM collaboration (Model MC), and retailer leading CM collaboration (Model RC). The models incorporate not only the ‘cause effect’ of consumers' increased willingness to purchase but also the ‘marketing effect’, meaning the market-base expansion associated with marketing efforts in a CM campaign. A key insight is that CM should never be adopted in the absence of marketing effect but can be adopted in the absence of cause effect. Comparing different models reveals that there can be consistency or conflict in CM mode choice among supply chain members. It is also found that an influencing parameter in CM collaboration is the allocation proportion of marketing expenditure rather than that of donation amount. These results indicate that the marketing effect, which has long been neglected in the literature, is a driving factor for firms to conduct CM, and the impact of corresponding marketing efforts should be emphasised.

Customizing customization in a 3D printing-enabled hybrid manufacturing supply chain

At-scale manufacture of customized products often requires both traditional processes and 3D Printing (3DP)-enabled additive manufacturing. Such hybrid manufacturing supports varying degrees of product customization achieved through variance in the mix of traditional and 3DP processes. Further, it supports the customization of the configuration of the 3DP-enabled supply chain. Our research investigates decision-making by 3DP manufacturers to obtain optimal profits based on the degree of customization. A two-echelon manufacturer-retailer supply chain that distributes customized products online and offline based on customers' channel preferences is considered. The Stackelberg Game model was used to study decision-making between the leader (manufacturer) and the follower (retailer). We analyzed two models: the centralized manufacturer-customized model and the decentralized retailer-customized model. The key findings of our study are as follows: Firstly, when the unit production cost is relatively small, it is optimal for the 3DP provider to offer consumers fully 3DP customized products. Secondly, with both the manufacturer-customized and the retailer-customized model, an increase in consumers' offline channel preference, will reduce the overall profits. Thirdly, in the retailer-customized model, the optimal selling price and profits are not affected by the ratio of the manufacturer's unit production cost and the total unit production cost. Finally, when the unit production cost increases with the customization degree, the optimal customization degree is relatively insensitive to potential market size changes. Our findings have practical relevance for firms seeking to gain a competitive advantage by deciding on the degree of customization and supply chain configuration strategies for 3DP manufacturing.

Call option contract in a supply chain with random yield and random demand using downconversion approach

PurposeThis study aims to examine the value of the call option contract in hedging the risks in the supply chain. The decentralized supply chain without call option contract is first studied as the criterion model for evaluations. This paper addresses several questions: What will be the optimal manufacturer’s production quantity, retailer’s ordering and pricing policies in the presence of random demand and random yield by applying the downconversion approach? How will the call option contract influence the optimal decisions for the members of the supply chain? Can the risk from randomness be divided among the members in the supply chain through the call option contract?Design/methodology/approachThis paper considers a two-level decentralized supply chain under random yield and random demand in which the manufacturer takes advantage of the downconversion approach with two scenarios, with and without option contract. To the best of the authors’ knowledge, no article or study uses the downconversion approach in a supply chain regarding random yield and random demand. Furthermore, the paper considers pricing with option contract in the supply chain, which makes this article stands out significantly from other articles in the literature.FindingsThis study shows that the downconversion approach would reduce the risk caused by the random yield, which appears to be the appropriate method for the environmental goal of the supply chains. Moreover, adopting a call option contract can increase flexibility and mitigate risks, resulting in more expected members’ profits.Research limitations/implicationsTo simplify the model, the authors assume one manufacturer and one retailer, so extending the model to consider multiple retailers instead of one retailer and inventory sharing between them would be interesting. Considering the option and exercise prices as decision variables would be important future research topics. Put option and bidirectional option contracts could be investigated in the future. Another extension is modeling asymmetry of information in supply chain.Originality/valueThis paper provides managerial insights on dealing with both demand and yield risks in a manufacturer–retailer supply chain. The manufacturer has a random yield production and produces two types of vertical products: low-end and high-end. To reduce waste caused by the random yield, the manufacturer uses a downconversion approach in which low-end products are made by converting the defective high-end products. The manufacturer purchased a shortage of high-end products from the secondary market (i.e. emergency sourcing). High-end products are sold through the retailer, and low-end products are sold directly by the manufacturer. The customer demand for high-end products in the end market is random and depends on the selling price, and the customer demand for the low-end products in the secondary market is independent and random. The retailer contracts the manufacturer with the call option to obtain high-end products to meet a random demand; in fact, by using the call option contract, the authors try to balance the risks between two members. Two scenarios of with and without call option contract are proposed. After the high-end product demand is observed, the retailer would exercise the option order quantity in the call option contract scenario and then place an instant order with the manufacturer if necessary. In each scenario, the manufacturer and the retailer make their decisions simultaneously (static game) to determine the retailer’s optimal ordering and pricing policies and the optimal production quantity of the manufacturer (Nash equilibrium) by maximizing their expected profits. Finally, the impact of the model parameters on the supply chain is expressed through numerical examples. The numerical analysis shows that the call option contract provides greater profit than the wholesale price contract.

Buy-One-Get-One Promotions in a Two-Echelon Supply Chain

Buy-one-get-one (BOGO) promotions have become popular. With BOGO, the first unit is sold for the regular price, and the second unit is discounted. We analyze BOGO in manufacturer–retailer supply chains. We identify conditions under which BOGO outperforms price reduction (PR) and everyday low price (EDLP) policies. We find that, for some products, whether consumers stockpile or not, if BOGO and PR have the same market size, BOGO has a larger retailer profit and the same or larger manufacturer profit because BOGO induces more consumers to buy and consume two units. When consumers stockpile, the retailer sets prices to prevent such behavior, and the retailer’s share of supply chain profits is largest under BOGO, whereas consumer surplus with BOGO is smaller than PR. We also find that BOGO reduces double marginalization. When PR expands market size more than BOGO, BOGO’s effectiveness diminishes. When consumers stockpile without increasing consumption and/or production cost is high, EDLP is best. Our results are robust to multiperiod with single-promotion-period settings. A large number of regular-price periods following a promotion period increases stockpiling, which erodes the retailer’s profit and favors EDLP. If promotions are offered for consecutive periods, a larger number of promotion periods increases PR’s efficacy relative to BOGO. Time-inconsistent consumers increase stockpiling and make PR outperform BOGO. Heterogeneous consumers’ holding cost and marginal utility prevent retailers from perfectly discriminating among consumers who make profit-reducing choices. Compared with retailers’ BOGO, manufacturers’ BOGO increases double marginalization and decreases retailers’ and manufacturers’ profits and consumer surplus. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was partially supported by the National Science Foundation of China [Grants 71972026, 72101102]. Y. Li’s work was supported by the China Scholarship Council [Grant 201806070094]. Supplemental Material: The online companion and data are available at https://doi.org/10.1287/mnsc.2022.4638 .

The Impact of Cost Sharing on Green Technology Investment in Competing Supply Chains

The investment in green technology in the process of product design and production is viewed as a powerful tool for sustainable development and carbon emission reduction. However, the substantial cost and pressure of competition weaken incentives for manufacturers to engage in green technology. In this paper, we consider two competitive manufacturer-retailer supply chains, where each manufacturer sells partially substitutable products through the exclusive retailer, study green technology investment selection by manufacturers, and examine the efficacy of retailer cost sharing scheme. Our analysis shows that a dominant equilibrium strategy for both manufacturers is to invest in green technologies, whether cost sharing is in place or not. Retailer sharing the cost of manufacturer green technology investment can avoid firms’ preference confliction over the green technology investment and improve social welfare simultaneously when both the cost-sharing rate and the degree of product/channel competition are relatively low. We also find that green technology investment by manufacturers does not necessarily curb total carbon emission, and the cost sharing can either strengthen or weaken the carbon emission reduction of green technology investment.

Integration of pricing and inventory decision in a supply chain under vendor-managed inventory with defective items and inspection errors

In this paper, the production-inventory-marketing model for a two-stage manufacturer-retailer supply chain under VMI policy with a price-sensitive demand is studied. An imperfect production at the manufacturer and inspection process involving with Type I and II errors at the retailer are considered. We assume that the manufacturer gives products to the retailer in a number of equal-sized shipments. This model is formulated as a Stackelberg game in which the retailer retains a certain degree of autonomy by reserving the right to choose the retail price and the manufacturer determines replenishment frequency, replenishment quantity and wholesale price. The critical supply chain decision factors including the manufacturer’s wholesale price, the retailer’s price, shipment frequencies and number of shipments are determined maximizing the total profit of each member of the supply chain. A solution procedure is proposed to find the Stackelberg game equilibrium. The performance of the model is assessed by a numerical example. The numerical shows that it is more beneficial for both the manufacturer and the retailer when the demand is less price sensitive.

Manufacturer–retailer supply chain model with payment time-dependent discount factor under two-level trade credit

It is usually observed in the marketplace that, for longer delayed payment, both the sales volume and the loss of interest in terms of opportunity cost turn up higher. On the other hand, for longer advanced payment, the sales volume appears lower but the earned interest appears higher. To balance between delayed and advanced payments, a discount factor that changes the wholesale price for different payment-term scenarios comes into play. In this paper, a single-manufacturer and a single-retailer supply chain model is developed where the manufacturer adopts a lot-for-lot policy for delivering the retailer's order quantity. The retailer offers a flexible payment time to customers. The market demand is assumed to be linearly dependent on the selling price. The discount factor which makes the difference between the two wholesale prices is taken as a function of payment time. The impact of advanced and delayed payments on the optimal payment time is discussed and analysed in a retailer-Stackelberg game structure. A numerical example is taken to exhibit the optimal results and perform sensitivity analysis.

Cooperative advertising and quantity discount in manufacturer-retailer supply chains

PurposeThis paper aims to study the impact of existence and lack of discount on the relationships between one manufacturer and one retailer under the cooperative and the non-cooperative games and the members’ profits are compared.Design/methodology/approachIn the first approach, the manufacturer’s price function is constant, and in the second approach, this price function is a decreasing function with respect to lot size. These approaches are modeled through three games structure, including two Stackelberg games and one cooperative game.FindingsSome numerical instances comprising sensitivity analysis are provided, and then the members’ profits in different scenarios are compared. This paper reveals that in the presented models, whether the members are inclined to change their profits.Practical implicationsThis paper presents a tool of decision-making for the type of relationships of members in two different circumstances, and an approach is also presented to maximize the members’ profit.Originality/valueIn this paper, the relationships between one manufacturer and one retailer are studied under six different circumstances, where pricing, cooperative advertising and inventory cost are considered simultaneously. Also, a different model is presented to make a balance in individual profits and gain more profit for each member compared to the cooperative and non-cooperative game.

Inventory Policies with Retailer’s Flexible Payment Time and Customer’s Fixed Credit Time for Manufacturer-Retailer Supply Chain

Inventory Policies with Retailer’s Flexible Payment Time and Customer’s Fixed Credit Time for Manufacturer-Retailer Supply Chain

Pricing and inventory decisions in a manufacturer-Stackelberg supply chain with deteriorating items

PurposeIntegrated decision of pricing and inventory control for a deteriorating product is known as a good practice in revenue management discipline. The purpose of this paper is to formulate the problem of joint pricing and inventory decision in a manufacturer–retailer supply chain with deteriorating items and backlogging. Furthermore, the other purpose is to develop an efficient algorithm to obtain the equilibrium solution.Design/methodology/approachIn this study, a manufacturer–retailer supply chain of a deteriorating product is considered. The retailer aims to maximize his profit, for which he jointly determines the retail price and replenishment cycle. In addition, the manufacturer should decide on the wholesale price to maximize her profit. Considering the problem as a manufacturer-Stackelberg game, the equilibrium solution is formulated and analyzed for both the manufacturer and the retailer. Moreover, two different procedures are developed to obtain the equilibrium solution. The first procedure is an exact procedure for the Taylor-approximated model and the second is a simulated annealing (SA)-embedded algorithm for the actual model.FindingsIt is found that Taylor-approximated procedure is more accurate than SA-embedded procedure. However, the latter is more time-efficient. Moreover, it is observed that the obtained solution is highly sensitive to demand parameters, while it is not the case for the cost parameters.Originality/valueThe paper models a real industrial problem, and its results could be used in analyzing any manufacturer–retailer supply chain with deteriorating items. Among others, the fruit and vegetable supply chains are more likely to have a similar setting, and this study’s results are applicable for such chains in food industry.

Impact of cap-and-trade regulation on coordinating perishable products supply chain with cost learning

<p style='text-indent:20px;'>This paper incorporates carbon emission regulation and cost learning effects to examine a manufacturer-retailer supply chain for deteriorating items over a multi-period planning horizon. We investigate their impacts on supply chain coordination under the assumption that the product demand is affected by the selling price, promotional effort and inventory level. We first propose two algorithms for determining optimal solutions of the centralized and decentralized models. We show that the decentralized system can be coordinated perfectly with a two-part tariff contract. Further, we study necessary conditions under which members of the supply chain can accept this contract. At last, we conduct numerical experiment to illustrate the obtained theoretical results in impact analysis and the robustness of the coordinated model.</p>

Reducing channel costs by investing in smart supply chain technologies

This paper establishes a modeling framework that incorporates channel costs as a decision variable when smart supply chain technology can be invested in. A traditional manufacturer-retailer supply chain is studied, and the conditions under which the technology should be invested are identified. Issues of supply chain efficiency and coordination are addressed. A platform supply chain is also investigated, and it is found that a platform may invest in reducing the channel cost even if it does not bear any part of this cost. In this case, the percentage fee is found to be an important parameter.

Research on joint emission reduction in supply chain based on carbon footprint of the product

This paper considers a two-echelon manufacturer-retailer supply chain system based on carbon footprint under time-varying demand, the purpose of which is to study the effect of joint emission reduction on emission reduction level and revenues of the retailer and the manufacturer, compared with non-joint. Firstly, it constructs the revenue model of non-joint emission reduction and confirms the optimal emission reduction level. Secondly, it adopts the inverse derivation to get the revenue model of joint emission reduction with carbon footprint, propaganda effect and cost-sharing mechanism, and acquires its optimal emission reduction level. Finally, the relationships of decision variables are explored through simulation analysis, and it conducts comparison research of non-joint and joint emission reduction. The results illustrate that the higher the manufacturer’s emission reduction level, the smaller the carbon footprint, which improves the low-carbon degree and increases the sales scale, then the manufacturer’s positivity of emission reduction is enhanced. The carbon emission reduction level rises with carbon footprint decreases, but the cost-sharing mechanism will stimulate the manufacturer to boost its carbon emission reduction level to some extent. With regard to the interaction of the propaganda effect and propaganda cost-sharing mechanism, the joint carbon emission reduction level can reach the maximum under the certain condition and it is much higher than that of non-joint. This will provide some reference for members in supply chain to make joint emission reduction strategies.

Which one is more valuable in coordinating the online and offline distribution? Service support or online price coordination

Nowadays effective mechanisms to coordinate the online and offline distribution become increasingly important in the business market. In this research, we first propose two mechanisms (i.e. the offline service to the retailer and the online price coordination) for the manufacturer and the retailer to employ. Our results show that the online price coordination does help coordinate the online and offline distribution and bring higher profits to the manufacturer-retailer supply chain and thus both the manufacturer and the retailer, while the offline service to the retailer does not; comparing to the offline service to the retailer, the online price coordination is a better strategy to be utilized to alleviate the online to offline competition. Furthermore, we investigate if a novel coordination mechanism, which combines the offline service to the retailer with the online price coordination, can help coordinate the online and offline distribution better and becomes the optimal coordination mechanism. Surprisingly, our results show that compared to both the offline service to the retailer and the online price coordination, this combination coordination mechanism does show a dominant competitive advantage to bring highest profits to all parties.

The impact of 3D printing on manufacturer–retailer supply chains

In this paper we consider the impact of 3D printing, or additive manufacturing, on a simple supply chain, consisting of a manufacturer and retailer, that serves stochastic customer demand. 3D printing is a relatively new manufacturing technology that is attracting attention from many firms. However, the impact of 3D printing on operations and firm relationships in a supply chain is relatively unexplored in academic research. A unique aspect of 3D printers is that they can be installed at the retailer in a supply chain, a characteristic that we highlight in our paper since it enables the supply chain to be more responsive to demand. Consequently, 3D printers can be adopted by either the manufacturer or, in a more novel situation, the retailer; we analyze the equilibrium of Stackelberg games in both cases. We characterize the economic and competitive conditions where either firm adopts 3D printing, and show that under either scenario, it is possible for both firms to earn more profit than a benchmark system without 3D printing. We identify and quantify the positive benefits associated with 3D printing, for both firms in a simple supply chain, when either firm adopts this new manufacturing technology. In many cases, the scenario where the manufacturer adopts 3D printing and installs 3D printers at the retailer results in the best profit outcomes for the manufacturer. The retailer’s preference, however, depends on problem parameters. Therefore, supply chain managers should carefully consider the possibility of 3D printing products in their supply chain.

Socially responsible supply chains with cost learning effects

Corporate social responsibility (CSR) has been attracting increasing attention. This paper investigates the implications of CSR upon a two-period manufacturer–retailer supply chain with cost learning effects which have been widely observed in different industries. Two scenarios are under consideration: the retailer exhibits CSR in one and the manufacturer does in the other. The analytical results demonstrate that compared with no CSR, the implementation of CSR generates higher pure profit for the entire chain. In contrast to the scenario where the manufacturer shows CSR, in the scenario where the retailer exhibits CSR, the manufacturer charges higher wholesale prices while the retailer charges lower retail prices, resulting in a higher chain-wide profit. Moreover, two-part tariff contracts are designed to coordinate the socially responsible supply chains. When coordinated, if the retailer exhibits CSR the wholesale prices are equal to the realized production cost which results from cost learning effects, while the wholesale prices are lower than the realized production cost if the manufacturer shows CSR. Interestingly, cost learning effects impair the pure profit of the coordinated supply chain when the effect of CSR is sufficiently high.

A game theoretic approach to coordinate price promotion and advertising policies with reference price effects in a two-echelon supply chain

In this paper, the price promotion and manufacturer national advertising are investigated in a manufacturer-retailer supply chain with reference price effects of consumers taken into account. A centralized game is studied followed by the two Stackelberg games of “consumer price promotion” and “retailer-consumer price promotion”. In the Stackelberg games, the manufacturer plays the role of the leader and the retailer is the follower. The results obtained indicate that the reference price and the memory factor of the costumer have profound effects on the profits of supply chain members, optimal depth of price promotion and advertising level. If sensitivity of the consumer to the gap between the price and the reference price is large enough, reference price has a considerable effect on the consumer's tendency to buy and the price promotion increases channel profits. Also, it is observed that the memory of the costumer has a positive effect on profits of supply chain members. Moreover, it is also shown that there exists an indifference point for the memory factor at which the reference price impact factor has no effect on the optimal values of the decision variables. Finally, it is observed that channel efficiency is improved by advertising.

Buy-One-Get-One Promotions in a Two-Echelon Supply Chain

Buy-one-get-one (BOGO) promotions have become very popular among many retailers. With BOGO, the first unit of the product is sold for the regular price and if a consumer buys a second unit, then it is discounted by some percentage or it may be free. We analyze BOGO promotions in a manufacturer-retailer supply chain. We identify the conditions under which BOGO promotion outperforms the commonly used price reduction promotion. Surprisingly, we find that for some type of consumer goods, with or without consumers' stockpiling, BOGO will always be preferred by the supply chain, i.e. BOGO results in larger profit for the retailer and the same or larger profit for the manufacturer compared to a per-unit price reduction promotion. This is because BOGO promotion induces more consumers to buy and consume two units in the promotional period. With consumers' stockpiling, the retailer sets prices such that no stockpiling occurs. We also find that the retailer's share of the supply chain profit is the highest under BOGO while consumer surplus is smaller with BOGO than with price reduction promotion. In addition, we find that BOGO reduces the double marginalization effect. When consumers are time-inconsistent, which prevents the retailers from eliminating consumers' stockpiling, a price reduction promotion may outperform a BOGO promotion.

A game theoretic approach to coordinate pricing, ordering and co-op advertising in supply chains with stochastic demand

This paper combines the newsboy problem with the cooperative advertisement problem in the presence of uncertain demand which depends on retail price as well as both local and national advertising expenditures to coordinate pricing, ordering, and advertising decisions in a manufacturer-retailer supply chain. A game theoretic approach is adopted to determine the equilibrium values of the decisions. Three different game scenarios based on the newsboy problem model are developed and analyzed: 1) Stackelberg manufacturer game in which manufacturer as the dominant power plays the role of leader in the market and the follower retailer makes its own best decisions after observing the leader decisions, 2) Nash game wherein both manufacturer and retailer have equal power in the market and make their decisions simultaneously to find their own best strategies and 3) centralized scenario in which retailer and manufacturer make the best decisions by information sharing and joint cooperation. The equilibrium decisions are obtained exactly in the three scenarios. Some corollaries are also presented and theoretically proved to show the relationships among the variables in centralized vs. decentralized supply chain. Finally, some numerical examples are randomly generated and a sensitivity analysis is carried out to show capabilities of the proposed models.

Closed-loop supply chain models with product recovery and donation

Besides economic profits, environmental and social concerns are attracting more and more attention. In this paper, we introduce the environmental responsibility through the product recovery and the social responsibility through the product donation. On the premise that the manufacturer undertakes the product recycling, we consider three distinct donation subjects, viz, the centralized system's donation, the manufacturer's donation and the retailer's donation, and develop a manufacturer-retailer supply chain model to analyze the effect of the product recovery and the donation on the operations management. The results show the product donation under the subsidy incentive expands the demand for the product and increases the collection rate. In terms of two decentralized systems, the members who bear the responsibility of the product donation can obtain more profits. And that the manufacturer undertakes the product donation is a better choice from environmental and social perspectives. From the view of economic profit, that the retailer undertakes the product donation is a better choice only when the collection cost is high and the donation subsidy is low. All decisions in the centralized system are better than those in the other decentralized systems. Thus, we present a two-part tariff contract with bargaining and a retailer-led revenue sharing contract to coordinate two decentralized systems, respectively. The optimal bargaining factor and the revenue-sharing proportion are determined to verify that the two kinds of contracts are feasible.