Loading...

Simultaneous coordination of capacity building and price decisions in a decentralized supply chain

Pezeshki, Y ; Sharif University of Technology | 2013

1080 Viewed
  1. Type of Document: Article
  2. DOI: 10.1007/s00170-012-4046-y
  3. Publisher: 2013
  4. Abstract:
  5. In this paper, we investigate the simultaneous coordination of price and capacity building decisions in a dyadic supply chain. This problem is a combination of capacity reservation problem and pricing problem. While the coordination of supply chain with stochastic demand and fixed prices has received much attention in the literature, price-dependent and stochastic demand has been less considered. We study the latter case where a price-setting retailer faces a linear decreasing demand with respect to price. To capture the uncertainty of the demand, we add a stochastic variable to the demand function. In addition, we incorporate production rate and inventory cost on the supplier side. We propose Revenue Sharing Reservation Contract with Penalty (RSRP) as a coordination mechanism to align the price and capacity decisions. We then extend the model to include multiple retailers which are geographically dispersed. We next conduct a comprehensive numerical example with an extensive sensitivity analysis to understand the behavior and robustness of the supply chain under a RSRP, and finally, we draw some managerial implications
  6. Keywords:
  7. Contract ; Capacity building ; Capacity decisions ; Capacity reservation ; Coordination mechanisms ; Decentralized supply chains ; Demand function ; Fixed prices ; Inventory costs ; Managerial implications ; Multiple retailers ; Numerical example ; Price decisions ; Price setting ; Price-dependent demand ; Pricing problems ; Production rates ; Revenue-sharing ; Stochastic demand ; Stochastic variable ; Supply chain coordination ; Contracts ; Economics ; Functions ; Numerical methods ; Supply chains ; Costs
  8. Source: International Journal of Advanced Manufacturing Technology ; Volume 64, Issue 5-8 , 2013 , Pages 961-976 ; 02683768 (ISSN)
  9. URL: http://link.springer.com/article/10.1007%2Fs00170-012-4046-y