A Theory of Intermediation in Supply Chains Based on Inventory Control

Zhan Qu, Horst Raff and Nicolas Schmitt

No HIAS-E-40, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: The paper shows that taking inventory control out of the hands of retailers and assigning it to an intermediary increases the value of a supply chain when demand volatility is high. This is because an intermediary can help solve two incentive problems associated with retailersi inventory control and thereby improve the intertemporal allocation of inventory. Adding an intermediary as a new link in a supply chain is also shown to reduce total inventory, to make shipments from the manufacturer less frequent and more variable in size, as well as to reduce social welfare.

Keywords: intermediation; inventory; demand volatility; supply chain (search for similar items in EconPapers)
JEL-codes: L11 L12 L22 L81 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-12
New Economics Papers: this item is included in nep-ind
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Downloads: (external link)
https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/28241/070_hiasDP-E-40.pdf

Related works:
Working Paper: A theory of intermediation in supply chains based on inventory control (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-40

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