Delivery time quotation and pricing in two-stage supply chains: Centralized decision-making with global and local managerial approaches

Ramzi Hammami, Yannick Frein and Abduh S. Albana

European Journal of Operational Research, 2020, vol. 286, issue 1, 164-177

Abstract: This study investigates the delivery time quotation and pricing in a two-stage make-to-order supply chain facing a time- and price-sensitive demand. We consider different managerial approaches which results in different models. First, we study a global model where a pair of price and delivery time are quoted to customers to maximize the expected overall profit while satisfying a global service level on the whole system. Second, we study a local model where each stage is required to quote a local delivery time while satisfying a local service level, and the delivery time quoted to customers consists of both local delivery times and must satisfy the global service level. The objective is similar to that of the global model. When both stages target the same service level than the one imposed to the whole system, we demonstrate under realistic conditions that satisfying the local service constraints enables to satisfy the global service constraint. This allows to remove the global constraint from the local model and solve it analytically. With comparison to the global model, the local model presents several managerial advantages with a limited profit loss. The mean gap is only 1.68% for a service level of 95%. We perform sensitivity analyses to derive insights into the impact of market characteristics and capacities on the performance of each stage and the overall performance. Finally, we extend the local model by allowing each stage to targeting a different service level. This leads to closing the profit gap with the global model.

Keywords: Supply chain management; Lead time quotation; Pricing; Two-stage tandem queue; Endogenous demand (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:286:y:2020:i:1:p:164-177

DOI: 10.1016/j.ejor.2020.03.006

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