Price discount based on early order commitment in a single manufacturer-multiple retailer supply chain

Jinxing Xie, Deming Zhou, Jerry C. Wei and Xiande Zhao

European Journal of Operational Research, 2010, vol. 200, issue 2, 368-376

Abstract: Early order commitment (EOC) is a strategy for supply chain coordination, wherein the retailer commits to purchasing from a manufacturer a fixed order quantity a few periods in advance of the regular delivery lead time. In this paper, we formulate and analyze the EOC strategy for a decentralized, two-level supply chain consisting of a single manufacturer and multiple retailers, who face external demands that follow an autocorrelated AR(1) process over time. We characterize the special structure of the optimal solutions for the retailers' EOC periods to minimize the total supply chain cost and discuss the impact of demand parameters and cost parameters. We then develop and compare three solution approaches to solving the optimal solution. Using this optimal cost as the benchmark, we investigate the effectiveness of using the wholesale price-discount scheme for the manufacturer to coordinate this decentralized system. We give numerical examples to show the benefits of EOC to the whole supply chain, examine the efficiency of the discount scheme in general situation, and provide the special conditions when the full coordination is achieved.

Keywords: Supply; chain; coordination; Early; order; commitment; Price; discount; Gaming (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377-2217(08)01067-9
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:200:y:2010:i:2:p:368-376

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().