Two-period pricing and ordering policy with price-sensitive uncertain demand

Abstract Demand for the products change with the time and thus production, promotion, pricing, etc. should be adopted at the time. In general, it is true for many hi-tech consumer products such as PCs, Mobiles, TVs and phones where demand is low and prices are high in the beginning and demand pick-up with a possible price drop in the growth face. In this work, we consider such a supply chain where the retailer sales a product over two selling periods with price-sensitive stochastic demands. Two types of models are proposed. Basic models are based on wholesale price contract. To improve the channel efficiency, we address the return policy. We show that the return policy is not always a win-win policy and cannot improve the whole channel efficiency in all cases. Finally, we carry out a comprehensive computational analysis to draw key insights of our models from the managerial point of view.

[1]  S. Nahmias,et al.  Modeling Supply Chain Contracts: A Review , 1999 .

[2]  P. Pontrandolfo,et al.  Supply chain coordination by revenue sharing contracts , 2004 .

[3]  S. Gilbert,et al.  Note. the Role of Returns Policies in Pricing and Inventory Decisions for Catalogue Goods , 1998 .

[4]  Abraham Mendoza,et al.  A serial inventory system with supplier selection and order quantity allocation considering transportation costs , 2016 .

[5]  S. Graves,et al.  Supply chain management : design, coordination and operation , 2003 .

[6]  Barry Alan Pasternack,et al.  Optimal Pricing and Return Policies for Perishable Commodities , 2008, Mark. Sci..

[7]  Hon-Shiang Lau,et al.  Manufacturer's pricing strategy and return policy for a single-period commodity , 1999, Eur. J. Oper. Res..

[8]  Gérard P. Cachon.  Supply Chain Coordination with Contracts , 2003, Supply Chain Management.

[9]  Evan L. Porteus,et al.  Selling to the Newsvendor: An Analysis of Price-Only Contracts , 2001, Manuf. Serv. Oper. Manag..

[10]  K. Lai,et al.  Two-period pricing and ordering policy for the dominant retailer in a two-echelon supply chain with demand uncertainty , 2009 .

[11]  José A. Ventura,et al.  A two-stage supply chain coordination mechanism considering price sensitive demand and quantity discounts , 2018, Eur. J. Oper. Res..

[12]  T. M. Whitin.  Inventory Control and Price Theory , 1955 .

[13]  Kin Keung Lai,et al.  Analysis of the impact of price-sensitivity factors on the returns policy in coordinating supply chain , 2008, Eur. J. Oper. Res..

[14]  Bibhas C. Giri,et al.  Joint determination of optimal safety stocks and production policy for an imperfect production system , 2012 .

[15]  Bibhas C. Giri,et al.  Joint effect of stock threshold level and production policy on an unreliable production environment , 2013 .

[16]  Arthur F. Veinott,et al.  Analysis of Inventory Systems , 1963 .

[17]  J. Proth,et al.  Analysis of a supply chain partnership with revenue sharing , 2005 .

[18]  Gérard P. Cachon,et al.  Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations , 2005, Manag. Sci..

[19]  I. Png,et al.  Manufacturer's Return Policies and Retail Competition , 1997 .

[20]  Lu Liu,et al.  Supply chain decision-making and coordination under price-dependent demand , 2006 .

[21]  Yushin Hong,et al.  Channel coordination through a revenue sharing contract in a two-period newsboy problem , 2009, Eur. J. Oper. Res..

[22]  Tiaojun Xiao,et al.  Ordering policy and coordination of a supply chain with two-period demand uncertainty , 2011, Eur. J. Oper. Res..

[23]  Kamal Chaharsooghi,et al.  Coordinating a Supply Chain with Customer Returns and Two-Period Newsboy Problem Using Insurance Contract , 2014 .

[24]  José A. Ventura,et al.  Determining the retailer's replenishment policy considering multiple capacitated suppliers and price-sensitive demand , 2015, Eur. J. Oper. Res..

[25]  K. Donohue.  Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes , 2000 .

[26]  Katta G. Murty,et al.  Nonlinear Programming Theory and Algorithms , 2007, Technometrics.

[27]  Maqbool Dada,et al.  Pricing and the Newsvendor Problem: A Review with Extensions , 1999, Oper. Res..

[28]  José A. Ventura,et al.  Integrated pricing and lot-sizing decisions in a serial supply chain , 2018 .

[29]  Anand Paul,et al.  On returns policies with exogenous price , 2007, Eur. J. Oper. Res..

[30]  E. Moradi,et al.  Quantitative Models in Supply Chain Management , 2012 .

[31]  Stephen Wolfram,et al.  The Mathematica book (3rd ed.) , 1996 .

[32]  Shaligram Pokharel,et al.  A two-period supply contract model for a decentralized assembly system , 2008, Eur. J. Oper. Res..