Two-level Supply Chain Research Articles

Pricing and incentive strategy for construction supply chain w ith carbon emission sensitive heterogeneous demand and gove rnment subsidies

Based on consumers’ purchase intention, this paper obtains the utility function of carbon emission sensitive heterogeneous consumers and establishes a two-level supply chain model composed of the owner and the contractor under the government subsidy. Based on the principle of maximizing the profits of each member of the supply chain, the optimal pricing, incentive intensity and emission reduction effort level of the owners and contractors are obtained. On this basis, the influences of government subsidies, customer composition ratio and carbon sensitivity on the owner’s optimal decision are analyzed. The results show that, with the increase of government subsidies for the contractor emission reduction costs, the proportion of carbon emission-sensitive consumers and the carbon sensitivity of consumers will increase, and the market demand will be increased, which will not only improve the profits of owners and contractors, but also the contractors’ emission reduction efforts. It can provide decision-making reference for enterprise product pricing, emission reduction and government subsidies.

Green Supply Chain Decisions Under Different Power Structures: Wholesale Price vs. Revenue Sharing Contract.

In the market, once consumers have a low-carbon preference, they will choose green low-carbon products. The market demand for green products is not only related to product price, but also consumers’ low-carbon preference. In this way, enterprise has to consider the cost of carbon emissions in the process of production and operation. In this paper, we consider a two-level supply chain system composed of a manufacturer and a retailer. The supply chain system can determine the price of products and the level of carbon emission reduction through different supply chain contracts: wholesale price contract and revenue sharing contract. However, the power control structure of a manufacturer and a retailer is different, which will further affect the decision-making strategy of the supply chain system. We set up four models (Wholesale Price—NM and NR, and Revenue-Sharing—SR and SM) of the supply chain with carbon emission reduction, and calculated and analyzed. The results show that firstly, regardless of whether the manufacturer’s power control structure or the retailer power structure is dominant, the manufacturer wholesale price with a contract on revenue-sharing is always higher than on wholesale price, and it is inversely proportional to the revenue-sharing proportion. Secondly, under the two power control structures, the carbon emission level of the manufacturer with a contract on revenue-sharing is always lower than on wholesale price, and it gradually decreases with the increase of the revenue-sharing proportion of the manufacturers. Thirdly, when the retailer dominates the supply chain, the retailer selling price with a contract on revenue-sharing is always higher than on wholesale price. Under the manufacturer’s power control structure, when the revenue-sharing ratio is small, the retailer selling price with a contract on revenue-sharing is higher than on wholesale price; when the revenue-sharing ratio is large, the retailer selling price with a contract on revenue-sharing is lower than on wholesale price. Finally, the validity of the model is verified by an example, and the sensitivity of the parameters is analyzed.

An Optimal Two-level Supply Chain Model for Small and Medium-sized Enterprises with a rework for New Products and Price-Dependent Demand

The advent of new technologies, globalization of markets, customers' varied needs, and increasingly fierce competition, is making SMEs seek to improve engagement with their suppliers and cost management practices in order to survive. Thus, SMEs clearly need to focus on the interests of the entire supply chain by enacting win-win policies. In this study, we investigate a two-level inventory model featuring a manufacturer and a buyer in the competitive market with the policy of producing new products. Imperfect quality products and the capacity to rework are also considered in the model. In other words, because of the competitive nature of the market, any increase in price leads to a decrease in demand. The mathematical model is proposed over two scenarios: a scenario where shortage can occur, and one with no possibility of shortage. The objective function of the mathematical model revolves around the central goal of maximizing the total profit of the supply chain considering both independent and joint optimization by the supply chain members. A new algorithm is proposed to solve the mathematical model whose applicability is evaluated by giving a numerical example to the analysis software MATLAB. The final results are analyzed and discussed using sensitivity analysis approach.

Differential game modelling of joint carbon reduction strategy and contract coordination based on low-carbon reference of consumers

Recently, there is a growing awareness and preference of low-carbon lifestyle among consumers. Therefore, every enterprise is faced with the task of carbon reduction in the production process. This paper sets up a differential game model for a two-level supply chain, and introduces low-carbon preference into the model. Then, the equilibrium strategies of the supply chain were analyzed under centralized and decentralized decision-makings, and the impacts of low-carbon reference on carbon reduction in the supply chain were discussed in details. Furthermore, the bilateral component sharing contract was adopted to coordinate the supply chain. The results of theoretical analysis were verified with an example. The results show that: the product goodwill trajectory is monotonic, while the low-carbon reference trajectory changes direction once at most. The introduction of low-carbon reference can promote the carbon reduction of the supply chain, but interestingly, when the memory parameter of low-carbon preference tends to infinity, or the sensitivity coefficient of low-carbon reference approaches zero, the carbon reduction effect of the supply chain will not change. Bilateral cost-sharing contract can effectively coordinate the supply chain, and encourage supply chain members to implement carbon reduction. The contract structure is not affected by the low-carbon reference. This research provides theoretical supports to dynamic carbon reduction of supply chains based on low-carbon reference.

Research on the variable buyback contract

Purpose Based on the traditional buyback model, this paper aims to propose a new buyback method – the variable buyback contract – to solve the serious inventory backlog in the current economic situation. Design/methodology/approach In this paper, the authors further study the buyback problem in a two-level supply chain with uncertain demand. Such a problem can be found in many research papers, which also use the Stackelberg game model. They put forward many factors that affect the buyback price, including risk preference, random arrival of consumers, etc. Different from the existing research, the authors propose another factor that may affect supply chain buyback – the retailer's remaining inventory to study the buyback contract. Findings First, the authors found that under the variable buyback contract, there is an optimal retail price, wholesale price and an optimal range of parameter settings for the buyback price. Second, the proposed Pareto-optimal solution for system improvement can achieve supply chain coordination. Third, under some conditions, the variable buyback contract is better than the wholesale price contract and fixed-price buyback contract. Originality/value First, this is the first paper to discuss to measure the buyback price with the retailer's remaining inventory. Second, the proposed buyback contract can help decision-makers to choose the optimal improvement strategies. Third, this contract has a certain practical significance, which can effectively alleviate the current inventory backlog problem.

Coordination of a two-level supply chain with contracts

We consider the coordination of planning decisions of a single product in a supply chain composed of one supplier and one retailer, by using contracts. We assume that the retailer has the market power: he can impose his optimal replenishment plan to the supplier. Our aim is to minimize the supplier’s cost without increasing the retailer’s cost. To this end, the supplier (or a trusted third party) proposes to the retailer a contract, which is made of a replenishment plan and a side payment. This side payment compensates the increase of cost of the retailer due to the fact that the proposed replenishment plan may have a cost larger than the retailer’s optimal replenishment plan. We evaluate how much the supplier can gain by using contracts under several scenarios which depend on the side payment coverage. From a theoretical point of view, in all the scenarios, contracts may decrease the cost of the supplier by an arbitrarily large factor. We perfom experiments which measures the gain that can be obtained in practice on various instances types. If side payments are allowed, experiments show that the use of contracts decreases significantly the cost of the supplier, and that side payments on the holding costs are sufficient. We show that if there is no side payment, or if there is no constraint on the side payment, then the problem can be solved in polynomial time. On the contrary, if the side payment is limited to the holding costs of the retailer, then the problem is NP-hard. We extend this study to the case where the information is asymmetric (the supplier—or the trusted third entity—does not know all the costs of the retailer): in this case, the situation is modelled by a screening game.

Using shared sell-through data to forecast wholesaler demand in multi-echelon supply chains

Operational forecasting in supply chain management supports a variety of short-term planning decisions, such as production scheduling and inventory management. In this respect, improving short-term forecast accuracy is a way to build a more agile supply chain for manufacturing companies. Demand forecasting often relies on well-established univariate forecasting methods to extrapolate historical demand. Collaboration across the supply chain, including information sharing, is suggested in the literature to improve upon the forecast accuracy of such traditional methods. In this paper, we review empirical studies considering the use of downstream information in demand forecasting and investigate different modeling approaches and forecasting methods to incorporate such data. Where empirical findings on information sharing mainly focus on point-of-sale data in two-level supply chains, this research empirically investigates the added value of using sell-through data originating from intermediaries, next to historical demand figures, in a multi-echelon supply chain. In a case study concerning a US drug manufacturer, we evaluate different methods to incorporate this data and consider both time series methods and machine learning techniques to produce multi-step ahead weekly forecasts. The results show that the manufacturer can effectively improve its short-term forecast accuracy by integrating sell-through data into the forecasting process and provide useful insights as to the different modeling approaches used. The conclusion holds for all forecast horizons considered, though it is most pronounced for one-step ahead forecasts. Therefore, our research provides a clear incentive for manufacturers to assess the forecast accuracy that can be achieved by using sell-through data.

An improved forecasting approach to reduce inventory levels in decentralized supply chains

This paper covers forecast management in decentralized supply chains. For various reasons, companies do not always agree to disclose their information. To deal with this issue, we consider a downstream demand inference (DDI) strategy in a two-level supply chain. DDI was assessed using different forecasting methods and was successfully tested using only a simple moving average. In an investigatory context using other forecasting methods, we propose the introduction of the weighted moving average method, which affects nonequal weights to past observations. First, we verify the unique propagation of demand processes. Second, we consider the forecast mean squared errors, the average inventory levels and the bullwhip effect as the supply performance metrics. Third, we formalize the manufacturer's forecast optimization problem and apply Newton's method to solve it. The optimization results, based on the simulated demands, confirm the effectiveness of our approach to produce further enhanced solutions and to improve the results of DDI. We have shown that a little change in the weights of the forecast method improves the competitiveness in the market. Conversely, the bullwhip effect is affected due to the nonequal weighting in the forecast method.

A two-warehouse multi-item supply chain with stock dependent promotional demand under joint replenishment policy: a mixed-mode ABC approach

A multi-item two-level supply chain model under promotional cost sharing is proposed and analysed in this investigation. Here, it is assumed that a retailer purchases different items from a wholesaler under joint replenishment policy and sells the items to its customers. Due to the scarcity of the market place, the retailer uses two rented warehouses to run the business – one with moderate capacity situated at the heart of the market place, namely and another with sufficiently large capacity, a little away from the market place, namely . Items are ordered jointly using basic period (BP) policy, initially stored at and transferred jointly to for sale following another BP policy. Demands of the items depend on displayed inventory levels, selling prices as well as the frequencies of the advertisements. Total cost due to the reduced selling prices and the advertisements is considered as the promotional cost. The problem is formulated as a mixed-integer optimisation problem in crisp as well in imprecise environments. To solve such real-life problems, here artificial bee colony algorithm is modified, tested and used. Model is illustrated with some hypothetical test problems and some managerial insights are outlined.

An efficient controlled elitism non-dominated sorting genetic algorithm for multi-objective supplier selection under fuzziness

Abstract Supplier selection and order allocation constitute vital strategic decisions that must be made by managers within supply chain management environments. In this paper, we propose a multi-objective fuzzy model for supplier selection and order allocation in a two-level supply chain with multi-period, multi-source, and multi-product characteristics. The supplier evaluation objectives considered in this model include cost, delay, and electronic-waste (e-waste) minimization, as well as coverage and weight maximization. A signal function is used to model the price discount offered by the suppliers. Triangular fuzzy numbers are used to deal with the uncertainty of delay and e-waste parameters while the fuzzy Technique for Order Performance by Similarity to Ideal Solution (TOPSIS) is used to obtain the weights of the suppliers. The resulting NP-hard problem, a Pareto-based meta-heuristic algorithm called controlled elitism non-dominated sorting genetic algorithm (CENSGA), is developed. The Non-dominated Sorting Genetic Algorithm (NSGA-II) and Multi-Objective Particle Swarm Optimization (MOPSO) are used to validate the applicability of the CENSGA algorithm and the Taguchi technique to tune the parameters of the algorithms. The results are analysed using graphical and statistical comparisons illustrating how the proposed CENSGA dominates NSGA-II and MOPSO in terms of mean ideal solution distance (MID) and spacing metrics.

Game theory model for optimum pricing in a two level supply chain

In this research, we are looking to present a pricing model in the two-level supply chain using game theory, assuming there is advertising and in terms of uncertainty. In this research, it was tried to provide different models for different conditions in the supply chain, taking into account various supply chain competition strategies and conditions. The issue was designed with the goal of optimizing the pricing of two alternative products provided by two different manufacturers. The survey environment was considered highly competitive. The discussion of advertising in the chain and the uncertainty in the problem parameters were also considered in order to bring the model closer to real-world conditions. Then the model was solved for different strategies and optimal strategies for each side of the chain were identified. Finally, numerical issues were presented, solved and analyzed in different dimensions.

Impacts of knowledge spillovers and cartelization on cooperative innovation decisions with uncertain technology efficiency

Cooperative innovation is a popular way for firms to pursue technological innovation and profits. Two important aspects, knowledge spillovers and cartelization, have a considerable impact on firms’ cooperative innovation performance. This paper studies cooperative innovation decisions in a two-level supply chain including an upstream firm and a downstream firm with knowledge spillovers (natural or perfect) and uncertain technology efficiency. To investigate the effects of knowledge spillovers and cartelization, four innovation modes, namely, non-cooperative innovation, innovation cartel, research joint venture and research joint venture cartel, are examined. We obtain several findings: (i) enhancing either firm’s knowledge spillover benefits both firms and the whole supply chain, and the profits of the firms and the chain reach the maximum when the two firms perfectly share their knowledge; (ii) cartelization can help upstream and downstream firms achieve a win–win scenario in a Pareto zone, but the supply chain always benefits; and (iii) both knowledge spillovers and cartelization are beneficial for the supply chain when the demand elasticity is not too small, specifically, with the research joint venture cartel mode being the best and the non-cooperation mode being the worst. Moreover, we extend the model to involve a general probability distribution of stochastic technology efficiency and find that high uncertainty in technology efficiency leads to lower profit for the downstream firm; we also relax a general cost function of technological innovation and discuss the robustness of the theoretical results.

A two-level supply chain with price sensitive random demand, random yield, inspection, and rework process

A two-level supply chain with price sensitive random demand, random yield, inspection, and rework process

A single-vendor single-buyer supply chain model with price and green sensitive demand under batch shipment policy and planned backorder

This paper considers a two-level supply chain which consists of a single-vendor and a single-buyer. The vendor produces a single product in lot and transfers the whole lot to the buyer in a combination of equal and unequal sized batches. All unequal sized batches are in a geometric progression with a fixed common ratio. Consumer's demand is sensitive to the retail price and greening improvement level of the product. At the buyer, planned shortages are allowed and are completely backlogged. Assuming that the buyer has higher decision power than the vendor, we develop non-coordinated decentralised model and coordinated model with cost sharing contract, and the integrated centralised model. The numerical results show that the cost sharing contract gives an impressive improvement in the profits of both the vendor and the buyer over their profits in the non-coordinated system. A sensitivity analysis is performed to explore how the changes in the key model-parameters effect the optimal profits of the vendor and the buyer and the whole supply chain.

On the Optimality of Inventory and Shipment Policies in a Two-level Supply Chain under Quadratic Price Dependent Demand

In this paper, a two-level supply chain consisting of a single-manufacturer supplying a single kind of product to a single-retailer is considered. A mathematical model is developed for both the centralised and de-centralised supply chain. The novel idea of the proposed model is that the demand is expressed as a quadratic function of the retailer's unit selling price. Ordering/setup costs, carrying costs and transportation costs are considered for model development. Replenishment quantity at the retailer and shipment frequency from manufacturer to retailer are considered as the decision variables. The objective of the proposed model is to demonstrate the optimality of total variable costs of the respective retailer, manufacturer and the supply chain under quadratic price dependent demand. Computer program is written in MATLAB and the model is solved with the help of a case study data. Further, the sensitivity analysis is carried out and finally, managerial implications are derived.

On the optimality of inventory and shipment policies in a two-level supply chain under quadratic price dependent demand

In this paper, a two-level supply chain consisting of a single-manufacturer supplying a single kind of product to a single-retailer is considered. A mathematical model is developed for both the centralised and de-centralised supply chain. The novel idea of the proposed model is that the demand is expressed as a quadratic function of the retailer's unit selling price. Ordering/setup costs, carrying costs and transportation costs are considered for model development. Replenishment quantity at the retailer and shipment frequency from manufacturer to retailer are considered as the decision variables. The objective of the proposed model is to demonstrate the optimality of total variable costs of the respective retailer, manufacturer and the supply chain under quadratic price dependent demand. Computer program is written in MATLAB and the model is solved with the help of a case study data. Further, the sensitivity analysis is carried out and finally, managerial implications are derived.

Modelling pricing, vertical co-op advertising and quality improvement in a non-cooperative three-echelon supply chain using game theory approach

Vertical cooperative (co-op) advertising is one of the well-known mechanisms for coordination of supply chains. Vertical co-op advertising is a financial agreement in which a member of the chain pays certain percentage (i.e. cooperation rate) of a subsequent member’s advertisement cost. Since increasing the number of echelons and decision variables in supply chain problems increase the modelling and computational complexity, most researchers study vertical co-op advertising in a two-level supply chain including a manufacturer and a retailer. This paper investigates the problem by considering price and quality levels as additional decision variables in a three-echelon supply chain consisting of one supplier, one manufacturer, and one retailer. The ultimate goal is to show supply chain managers the importance of product quality as well the role of local advertisement in positively influencing market demand on top of the traditional approach of speed and efficiency optimization. Using game theory approach, power of the manufacturer is assumed to be higher than or equal to those of others in the chain. Five different relationships between players are considered in five non-cooperative games (named as G1–G5) and equilibrium solutions are extracted for each. The results show that the manufacturer prefers to play Stackelberg with the retailer and the supplier rather than be in conflict with them in Nash game. Such preference can lead manufacturer towards high quality and cost-efficient product/service via efficient advertisement in our complex network of business firms.

Credit and discount incentive options for two-level supply chain coordination, under uncertain price-dependent demand

In this article, we propose a two-level supply chain (SC) consisting of a single supplier who supplies one type of product to a single retailer. The market demand rate for the product is uncertain and sensitive to the selling price of the retailer. The objectives of this paper are to determine simultaneously pricing and ordering policies for the retailer, as well as to specify number of replenishments (shipping policy) for the supplier. Firstly, the problem is formulated under decentralized SC structure where each member optimizes his/her decisions regardless of the others’ profitability. Then, a centralized SC structure was proposed and optimized based upon the whole SC profitability. Afterwards, we developed coordinated SC structures to guarantee the members’ participation in which, two mechanisms include credit payment period and the wholesale price discount incentives, were introduced based on profit-sharing strategy and by using the members’ bargaining power. The desirability of the proposed mechanisms has been examined from the view point of each SC members in the competitive market. To this end, numerical examples and sensitivity analyses were provided to illustrate the theoretical results of the proposed model by comparing the profit values in three decentralized, centralized, and coordination structures.

NON-COOPERATIVE TWO-ECHELON SUPPLY CHAINS WITH A FOCUS ON SOCIAL RESPONSIBILITY

To cooperate or not is one of the most challenging issues of supply chain management era. If the supply chain is managed optimally, the entire profitability increases. Meanwhile, corporate Social Responsibility (hereafter CSR) is defined as the social and ethical behavior of supply chain members against stakeholders such as shareholders, final customers, employees and executives. Moreover, the observance of the social responsibility obligations is of great importance for consumers and shareholders of companies. The decisions of the supply chain’s members play a direct role in determining the profits of each. These decisions are in conflict with other members in a competitive environment. In this paper, the contradictory variables encompasses the cost resulting from the performance of corporate social responsibility, inventory, shortage, advertising and pricing in a two-level supply chain, consisting a manufacturer and a retailer. After identifying the quantitative variables for measuring the social responsibility using Delphi-Fuzzy methods and Interpretive Structural Modeling, the most important and influential variable of measuring the social responsibility performance (forced labor ratio) has been selected. Subsequently, after modeling the profit function of each player, optimal results were emanated according to the bargaining power of each member and based on Nash and Stackelberg games. Afterwards, with numerical examples, the optimization and sensitivity analysis of social responsibility in each model has been discussed. The results indicate that the profit of manufacturer and retailer reduces by increasing the proportion of forced labor. Based upon Nash equilibrium, the manufacturer’s profit decreases with a slight slope; nonetheless, on retailer and manufacturer leadership models, the profit decreases with a slight increase of the forced labor.

Two-level supply chain quality improvement through a wholesale price coordination contract on pricing, quality and services

Two-level supply chain quality improvement through a wholesale price coordination contract on pricing, quality and services