scholarly journals Implications of Contract-Bargaining Mechanisms for Coordination and Profit Sharing in a Distribution Channel

2021 ◽  
Vol 2021 ◽  
pp. 1-17
Author(s):  
Nikunja Mohan Modak ◽  
Shibaji Panda ◽  
Sudipta Sinha ◽  
Dipankar Ghosh
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Distribution Channel ◽  
Profit Sharing ◽  
Nash Bargaining ◽  
Bargaining Process ◽  
Channel Conflict ◽  
Holding Costs ◽  
Sequential Bargaining ◽  
Holding Cost

The present work models a three-level distribution channel that has a manufacturer, multiple distributors, and multiple retailers under each distributor to analyze channel members’ cooperative, semicooperative, and noncooperative decisions for an arbitrary replenishment cycle other than the first in the infinite time horizon. It uses two sequential bargaining processes: forward contract-bargaining (FCB) and backward contract-bargaining (BCB) to eliminate channel conflict and allocate additional profit among channel members. We successfully implement a hybrid contract mechanism that combines wholesale price discount (WPD) and subsidy on holding cost for channel coordination. The concept of Nash bargaining is applied for additional profit sharing. The proposed hybrid contract can fully coordinate the tree-like supply chain and enrich the entire profit of the supply chain at its best. The manufacturer provides WPD to each distributor separately, and each distributor provides a subsidy to each of its retailers independently. Both the sequential bargaining processes are designed in such a way that an upstream channel member always has the opportunity to account for different reservations for its different downstream members. Although each bargaining process eliminates the channel conflict, finds win-win ranges, and distributes surplus profit, the distributors prefer BCB, whereas the manufacturer and the retailers prefer the FCB. Also, without receiving WPD, the distributors have the ability to coordinate the supply chain and find win-win profits by subsidizing the retailers’ holding costs. A numerical case is presented to explain the findings of the work.

Implications of Price Matching in Supply Chain Negotiation

2021 ◽  
Author(s):  
Weixin Shang ◽  
Gangshu (George) Cai
Keyword(s):  
Supply Chain ◽  
Social Welfare ◽  
Wholesale Price ◽  
Consumer Welfare ◽  
Problem Definition ◽  
Nash Bargaining ◽  
Price Matching ◽  
The Impact ◽  
Multiple Buyers ◽  
Wholesale Pricing

Problem definition: Few papers have explored the impact of price matching negotiation (PM), in which a channel matches its price with the resulting wholesale price bargained by another channel, on firms’ performances, consumer welfare, and social welfare, with and without supply chain coordination. Academic/practical relevance: Negotiation has been widely seen in determining both uniform and discriminatory wholesale prices, which affect outcomes of competitive supply chain practices. Methodology: To characterize the PM mechanism, we use game theory and Nash bargaining theory to compare PM with simultaneous negotiation (SN) through a common-seller two-buyer differentiated Bertrand competition model. Results: Our analysis reveals that PM can benefit the seller but hurt all buyers, which is at odds with some fair wholesale pricing clauses intending to protect buyers. Under coordination with side payments, however, all firms can conditionally benefit more from PM than from SN. Despite firms’ gains, PM leads to less consumer utility and social welfare compared with SN, unless the second buyer in PM is considerably less powerful than the first buyer. Coordination further worsens PM’s negative impact on consumer utility and social welfare. Moreover, the existence of a spot market can increase the wholesale price in PM, hurting buyers, consumers, and society. Furthermore, the qualitative results about PM remain robust under an alternative disagreement point for PM, multiple buyers, and other extensions. Managerial implications: This paper delivers insights on when price matching in supply chain wholesale price negotiation can benefit a seller, buyers, consumers, and society in a variety of scenarios. It advocates how managers can use PM to their own advantages and provides rationale to decision makers for policy regulations regarding wholesale pricing.

Pricing and service decision of dual-channel operations in an O2O closed-loop supply chain

2017 ◽  
Vol 117 (8) ◽  
pp. 1567-1588 ◽  
Author(s):  
Lingcheng Kong ◽  
Zhiyang Liu ◽  
Yafei Pan ◽  
Jiaping Xie ◽  
Guang Yang
Keyword(s):  
Supply Chain ◽  
Closed Loop ◽  
Wholesale Price ◽  
Revenue Sharing ◽  
Service Level ◽  
Return Rate ◽  
Transfer Payment ◽  
Channel Conflict ◽  
Content Type ◽  
Dual Channel

Purpose The online direct selling mode has been widely accepted by enterprises in the O2O era. However, the dual-channel (online/offline, forward/backward) operations of the closed-loop supply chain (CLSC) changed the relationship between manufacturers and retailers, thus resulting in channel conflict. The purpose of this paper is to take a dual-channel operations of CLSC as the research target, where a manufacturer sells a single product through a direct e-channel as well as a conventional retail channel; the retailer are responsible for collecting used products in the reverse supply chain and the manufacturer are responsible for remanufacturing. Design/methodology/approach The authors build a benchmark model of dual-channel price and service competition and take the return rate, which is considered to be related to the service level of the retailer, as the function of the service level to extend the model in the reverse SC. The authors then analyze the optimal pricing and service decision under centralization and decentralization, respectively. Finally, with the revenue-sharing factor, wholesale price and recycling price transfer payment coefficient as contract parameters, the paper also designs a revenue-sharing contract led by the manufacturer and explores in what situation the contract could realize the Pareto optimization of all players. Findings In the baseline model, the results show that optimal price and service level correlate positively in centralization; however, the relation relies on consumers’ price sensitivity in decentralization. In the extension model, the relationship between price and service level also relies on the relative value of increased service cost and remanufacturing saved cost. When the return rate correlates with the service level, a recycling transfer payment can elevate the service level and thus raise the return rate. Through analyzing the parameters in revenue-sharing contract, a point can be reached where lowering the wholesale price and raising the transfer payment coefficient will promote retailers to share revenue. Practical implications Many enterprises establish the dual-channel distribution system both online and offline, which need to understand how to resolve their channel conflict. The conflict is especially strong in CLSC with remanufacturing. The result helps the node enterprises realize the coordination of the dual-channel CLSC. Originality/value It takes into account the fact that there are two complementary relationships, such as online selling and offline delivery; used product recycling and remanufacturing. The authors optimize the strategy of product pricing and service level in order to solve channel conflict and double marginalization in the closed-loop dual-channel distribution network.

Strategic Inventories Under Supply Chain Competition

2021 ◽  
Author(s):  
Xi Li ◽  
Yanzhi Li ◽  
Ying-Ju Chen
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Distribution Channel ◽  
Problem Definition ◽  
Supply Chain Competition ◽  
Managerial Implications ◽  
Holding Cost ◽  
Inventory Holding ◽  
Period Model

Problem definition: We consider the effects of strategic inventory (SI) in the presence of chain-to-chain competition in a two-period model. Academic/practical relevance: Established findings suggest that SI may alleviate double marginalization and improve the efficiency of a decentralized distribution channel. However, no studies consider the role of SI under chain-to-chain competition. Methodology: We build a two-period model consisting of two competing supply chains, each with an upstream manufacturer and an exclusive retailer. The retailers compete on either price or quantity. We characterize the firms’ strategies under the concept of perfect Bayesian equilibrium. We consider cases where contracts are either observable or unobservable across supply chains. Results: (1) SI still exists under chain-to-chain competition. Retailers may carry more inventory when the competition becomes fiercer, which further intensifies the supply chain competition. (2) Different from the existing findings, SI may backfire and hurt all firms. Interestingly, firms may benefit from a higher inventory holding cost. (3) Under supply chain competition, the prisoner’s dilemma can arise if competition intensity is intermediate; in other words, manufacturers are better off without strategic inventory, and yet they cannot help allowing strategic inventory, which is the unique equilibrium. Managerial implications: Despite its appeal among firms of a single supply chain, the role of SI is altered or even reversed by chain-to-chain competition. Conventional wisdom on SI should be applied with caution.

scholarly journals Green Supply Chain Management with Nash Bargaining Loss-Averse Reference Dependence

Mathematics ◽  
2021 ◽  
Vol 9 (24) ◽  
pp. 3154
Author(s):  
Wentao Yi ◽  
Zhongwei Feng ◽  
Chunqiao Tan ◽  
Yuzhong Yang
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Reference Point ◽  
Wholesale Price ◽  
Optimal Strategies ◽  
Retail Price ◽  
Nash Bargaining ◽  
Green Supply Chain ◽  
Bargaining Solution ◽  
Efficiency Coefficient

This paper investigates a two-echelon green supply chain (GSC) with a single loss-averse manufacturer and a single loss-averse retailer. Since the Nash bargaining solution exactly characterizes endogenous power and the contribution of the GSC members, it is introduced as the loss-averse reference point for the GSC members. Based on this, a decision model of the two-echelon GSC with loss aversion is formulated. The optimal strategies of price and product green degree are derived in four scenarios: (a) the centralized decision scenario with rational GSC members, namely the CD scenario; (b) the decentralized decision scenario with rational GSC members, namely the DD scenario; (c) the decentralized decision scenario with the GSC members loss-averse, where the manufacturer’s share is below its own loss-averse reference point, namely the DD(∆m ≥ πm) scenario; (d) the decentralized decision scenario with the GSC members loss-averse, where the retailer’s share is below its own loss-averse reference point, namely the DD(∆r ≥ πr) scenario. Then, a comparative analysis of the optimal strategies and profits in these four scenarios is conducted, and the impacts of loss aversion and green efficiency coefficient of products (GECP) on the GSC are also performed. The results show that (i) GECP has a critical influence on the retail price and the wholesale price; (ii) the GSC with loss aversion provide green products with the lowest green degree; (iii) the retail price, the wholesale price and product green degree are decreasing monotonically with the loss aversion level of the GSC member without incurring loss; (iv) furthermore, the effect of the loss aversion level of the GSC member with incurring loss on the optimal strategies is related to GECP and the gap between the GSC members’ loss aversion levels.

An Integrated Production-Supply System with Uncertain Demand, Nonlinear Lead Time and Allowable Shortages

2012 ◽  
Vol 3 (4) ◽  
pp. 1-18 ◽  
Author(s):  
Hengameh Tahmasebi ◽  
Junfang Yu ◽  
Bhaba R. Sarker
Keyword(s):  
Supply Chain ◽  
Lead Time ◽  
Wholesale Price ◽  
Nonlinear Function ◽  
Profit Sharing ◽  
Supply System ◽  
Uncertain Demand ◽  
Lost Sales ◽  
Supply Chain System ◽  
Integrated Production

A supply chain consisting of a single-supplier and a single-buyer is modeled and compared in two different modes: non-coordinated and coordinated. The model is established based on the fact that the demand is uncertain and shortages are considered as lost sales. The buyer’s order lead time is a nonlinear function of the buyer’s order size and the number of shipments from the supplier. Quantity discount offers are used as a tool to achieve the coordination between both parties. In non-coordinated mode the total annual profits of both parties are maximized using partial derivative and a lower and an upper bound are obtained for the supplier’s wholesale price. For the coordinated mode total annual profit of the whole supply chain system is maximized using partial derivatives and coordination may increase the total annual profit of the whole system is mathematically proved. In order to encourage the both parties to coordinate, a fair profit-sharing method is proposed based on the total costs that each party incurs. The supplier’s wholesale price is evaluated such that coordination seems appealing and profitable for both parties.

A Coordinated Revenue-Sharing Contract for a Two-Stage Supply Chain with Linear Stepwise Inventory Holding Costs

2009 ◽  
Vol 2 (4) ◽  
pp. 1-23 ◽  
Author(s):  
Jing Hou ◽  
Amy Z. Zeng ◽  
Lindu Zhao
Keyword(s):  
Supply Chain ◽  
Revenue Sharing ◽  
Sequential Optimization ◽  
Inventory Level ◽  
Two Stage ◽  
Holding Costs ◽  
Revenue Sharing Contract ◽  
Holding Cost ◽  
Inventory Holding ◽  
Optimization Mechanism

In this paper, the authors focus on examining the coordination mechanisms for a two-stage supply chain comprising one supplier and one retailer. The authors consider such a channel relationship that the transaction quantity between the two members is sensitive to the supplier’s inventory level and that the supplier’s unit inventory holding cost has a linear stepwise structure. They devise a coordinated revenue-sharing contract with bargaining so that each party’s respective profit is better than that resulted from the simple sequential optimization mechanism. The key contract parameters, namely the supplier’s inventory level and the retailer’s revenue-sharing fraction, are obtained and analyzed. Numerical illustrations of the contracts are given and shed lights on how the supply chain should coordinate in order to gain better performance.

The impact of firms’ social ties with customers on dual-channel supply chains

2019 ◽  
Vol 38 (6) ◽  
pp. 777-796
Author(s):  
Wei Wei ◽  
Shue Mei ◽  
Jiameng Yang ◽  
Zhiyong John Liu
Keyword(s):  
Social Media ◽  
Supply Chain ◽  
Social Ties ◽  
Wholesale Price ◽  
Information Service ◽  
Distribution Channel ◽  
Retail Price ◽  
The Other ◽  
Content Type ◽  
Dual Channel

Purpose More and more firms are utilizing social media as a distribution channel to sell products. By establishing business accounts on social media firms provide information service to strengthen their relationship with customers and boost sales. The purpose of this paper is to investigate the pricing, information service provision and channel strategies of firms who sell products through social media. Design/methodology/approach The authors use a game theoretical model to study a dual-channel supply chain consisting of one manufacturer and one retailer. Two scenarios are considered – under one scenario the manufacturer and under the other the retailer, respectively, solely provides information service. Both firms’ pricing decisions and profits are compared. Findings The authors find that in the dual-channel model with either the manufacturer or the retailer providing information service to enhance the demand: a firm that has stronger social ties with customers is willing to provide more information services; when the manufacturer provides information service, it charges a direct price higher than the wholesale price, and whether the direct-channel price exceeds the retail price depends on the strength of the manufacturer’s social ties with customers; when the retailer provides information service, the direct price is equal to the wholesale price, both lower than the retail price; and a firm always prefers itself rather than the other firm to provide information service. However, the whole supply chain is better off if the manufacturer rather than the retailer provides information service. Research limitations/implications Besides the relationship between firms and customers, the peer relationship among customers also impacts the supply chain performance, which might be studied in the future. Originality/value The study is novel in theoretically exploring the influence of firms’ social relationship with customers on firms’ pricing and channel strategies.

Joint Operational and Financial Collaboration in a Capital-Constrained Supply Chain Under Manufacturer Collateral

2018 ◽  
Vol 35 (03) ◽  
pp. 1850010 ◽  
Author(s):  
Gongbing Bi ◽  
Yalei Fei ◽  
Xiaoyong Yuan ◽  
Dong Wang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Distribution Channel ◽  
Optimal Solution ◽  
Bank Credit ◽  
Order Quantity ◽  
Purchase Order ◽  
Constraint Problem ◽  
Fierce Competition

Operational collaboration in a supply chain is important due to the fierce competition among supply chains. However, the collaboration in a supply chain is often hindered by its distribution channel’s lack of funds. It is of significance to alleviate the capital constraint problem of the distribution channel and explore new joint operational and financial collaboration solutions. In this paper, we focus on exploring the optimal solution of operational collaboration in the presence of manufacturer collateral. We consider a supply chain consisting of a well-capitalized manufacturer and a capital-constrained retailer that faces difficulties obtaining credit from the bank. To help the retailer access financing for a purchase order, the manufacturer promises to pay the lender a proportion of the retailer’s loan if the retailer goes bankrupt. We find that when the bank credit with manufacturer collateral is considered as a mix of trade credit and bank credit, the retailer’s financing equilibrium depending on the maximum wholesale price what the manufacturer can set, can be neither trade credit nor bank credit alone, but a combination of them. Moreover, the retailer’s order quantity and the chain’s operational collaboration level will benefit from the manufacturer collateral.

scholarly journals Optimization and Coordination of Crowdsourcing Supply Chain in Fast Fashion Industry

2018 ◽  
Vol 2018 ◽  
pp. 1-16 ◽  
Author(s):  
Jizi Li ◽  
Chunling Liu ◽  
Xianyi Zeng ◽  
Nian Zhang
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Profit Sharing ◽  
Risk Level ◽  
Fashion Industry ◽  
Supply Chain System ◽  
Fast Fashion ◽  
Incentive Policy ◽  
Sharing Scheme ◽  
Production Quantity

Due to inadequate designers in fast fashion industry and the development of the Internet, small-and-medium-sized garment makers have gradually turned to external talents to enhance their new product design efficiency via crowdsourcing initiative. This paper presents a new framework of crowdsourcing supply chain for fast fashion industry. First, a basic multiperiod order model is established in a crowdsourcing supply chain system, where a garment maker chooses the best one among available solutions submitted by online designers (i.e., crowdsources) in each period, then transforms it into finished product, and sells to consumers through a retailer. Second, we extend this model by integrating the factors of capital turnover, the retailer’s risk-aversion, and the garment maker’s minimum production quantity. Moreover, utilizing wholesale price, buyback, and profit-sharing scheme designs a mixed contract for coordinating crowdsourcees, retailer, and garment maker of crowdsourcing supply chain for achieving Pareto optimality. The models help the garment maker determining the optimal production quantities of crowdsourcing designed products and enable the retailer placing the optimum orders and setting the reasonable risk level. In addition, we also find that the incentive policy for crowdsourcing designers can be fulfilled by using a profit-sharing scheme with a piecewise function of order quantity instead of a linear function.

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