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An integrated coordination model for a supply chain dealing with short life-cycle products operating under stock dependent demand

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  1. Abstract
  2. Introduction
  3. Literature review
  4. Development of the model
    1. Assumptions
    2. Notation
    3. Non-coordinated setting
    4. Determination of retailer's optimum order quantity under no returns case
    5. Determination of retailer's optimum order quantity with returns
    6. Coordinated setting (Centralized setting)
    7. Determination of centralized optimum order quantity with returns
    8. Determination of feasible wholesale price range to adopt centralized order quantity under returns
  5. Numerical illustration
  6. Conclusion and future work
  7. References

The market demand of any product is generally influenced by quality, warranty, service, advertisement and sales promotion. Apart from these factors, the amount of stock displayed will also significantly influence the sales at retail level. Though, many inventory models have been developed based on stock dependency criterion, it has not received much attention from the researchers while designing supply chain contracts. This paper attempts to fill this gap. In this paper, an integrated coordination model is developed for a supply chain involving a manufacturer and a retailer dealing with short lifecycle products. The model combines both buyback contract and quantity discounts contract. Here, demand is modeled in additive fashion. Its formulation captures the three features: price-sensitivity, initial-stock dependency and uncertainty of demand. A numerical study is carried out to illustrate the model and sensitivity analysis is performed to analyze the impact of price-sensitivity, stock-dependency, and demand uncertainty on the supply chain performance The present study has shown that the integrated model is self-enforcing and it is demonstrated that through the integrated coordination model, the system achieves Pareto-efficiency and a win-win situation.

[...] Wang and Gerchak (2001) proposed a coordination model of a two-echelon supply chain with an initial stock level dependent demand. They pointed out through a price plus inventory-subsidy contract that the manufacturer could achieve not only channel coordination but also any desired allocation of the channel profit between himself and the retailer. Shi and Su (2004) have developed an integrated coordination model for a two stage supply chain that combines both returns policies and quantity discounts contract. However, they have not considered the effects of price-sensitivity and stock dependency in their model. [...]

[...] Vrat, ?Inventory model for stock dependent consumption Opsearch, 23(1986), pp. 19-24. R.C. Baker and T.L. Urban, deterministic inventory system with an inventory-level-dependent demand The Journal of the Operational Research Society 39(1988), pp. 823-831. H. Soni and N.H. Shah, ?Optimal ordering policy for stock-dependent demand under progressive payment scheme?, European Journal of Operational Research, 184(2008), pp. 91-100. T.A. Taylor, ?Supply chain coordination under channel rebates with sales effort effects? , Management Science 48(2002), pp. 992-1007. Y. Wang and Y. Gerchak, ?Supply chain coordination when demand is shelf-space dependent?, Manufacturing and Service Operations Management 3(2001), pp. [...]

[...] In this paper, we have developed an integrated coordination model that combines both buyback and quantity discounts contracts for a supply chain dealing with short life-cycle products by modeling demand as a function of price and initial stock. The rest of the paper is organized as follows: Section 2 provides a brief review of literature. In section we have presented the mathematical model. Section illustrates the model using a numerical example and finally, conclusions and future directions of work are included in section 5. [...]

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