On the interplay between local lead times, overall lead time, prices, and profits in decentralized supply chains

Ramzi Hammami, Yannick Frein, Imen Nouira and Abduh-Sayid Albana
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Ramzi Hammami: ESC [Rennes] - ESC Rennes School of Business
Yannick Frein: UGA - Université Grenoble Alpes, CNRS - Centre National de la Recherche Scientifique
Imen Nouira: ESC [Rennes] - ESC Rennes School of Business
Abduh-Sayid Albana: UGA - Université Grenoble Alpes, CNRS - Centre National de la Recherche Scientifique

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Abstract: A two-stage decentralized supply chain operates in make-to-order under a stochastic environment. Each stage represents an independent firm that quotes a price and a delivery time to its downstream while satisfying a minimum service level. The mean demand depends on the final price and the overall delivery time quoted to the customers by the whole supply chain. We study three settings. First, the downstream, as a Stackelberg leader, decides its price and controls both delivery times, and the upstream, as a follower, reacts by deciding its own price. Second, the downstream decides its delivery time and controls prices, and the upstream reacts by quoting its own delivery time. Third, the upstream, as a leader, decides its price and controls both delivery times, and the downstream, as a follower, decides its own price. This is the first study to investigate the delivery time quotation and pricing in decentralized supply chains where each firm performs operations and has a delivery time, and the demand is function of both upstream and downstream delivery times in addition to final price. We characterize analytically the optimal strategy under each setting and derive insights into the interplay between local delivery times, overall delivery time, prices, demand, and profits. We investigate how delivery times can be used to coordinate the supply chain and the impact of firms' capacities.

Keywords: Lead time; Pricing; Decentralized supply chains; Stackelberg game (search for similar items in EconPapers)
Date: 2022-01
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Published in International Journal of Production Economics, 2022, 243, pp.108324. ⟨10.1016/j.ijpe.2021.108324⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03417123

DOI: 10.1016/j.ijpe.2021.108324

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