Coordinating price and service level decisions for a supply chain with deteriorating item under vendor managed inventory

Tiaojun Xiao and Tiantian Xu

International Journal of Production Economics, 2013, vol. 145, issue 2, 743-752

Abstract: This paper develops a Stackelberg game model of a one-supplier and one-retailer supply chain with deteriorating product to investigate how to coordinate the price and service level decisions under vendor-managed inventory (VMI) and examine system efficiency. We study the equilibrium price and service level decisions under the decentralized setting and the centralized setting, respectively; and design a generalized revenue-sharing mechanism to coordinate the supply chain. We find that the interaction between the retail price and the service level may invert the effect of deterioration rate on the retail price. The system efficiency of decentralized supply chain increases with market scale, price sensitivity, deterioration rate, the supplier's cost (including unit production cost, holding cost, and deterioration cost), and service investment efficiency, while decreases with production rate. In addition, we find that VMI may invert the effect of deterioration rate on the unit wholesale price of the decentralized supply chain; in the coordinated setting, the retailer should pay a higher transfer price to the supplier with VMI than that without VMI, the transfer price decreases with service investment efficiency, and higher service investment efficiency shrinks the transfer price difference.

Keywords: Vendor managed inventory; Game theory; Supply chain coordination management; Revenue-sharing; Deterioration (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527313002697
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:proeco:v:145:y:2013:i:2:p:743-752

DOI: 10.1016/j.ijpe.2013.06.004

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().