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Paper Information

Journal:   JOURNAL OF INDUSTRIAL ENGINEERING INTERNATIONAL   DECEMBER 2015 , Volume 11 , Number 4; Page(s) 531 To 542.
 
Paper: 

A TWO-LEVEL DISCOUNT MODEL FOR COORDINATING A DECENTRALIZED SUPPLY CHAIN CONSIDERING STOCHASTIC PRICE-SENSITIVE DEMAND

 
 
Author(s):  HEYDARI JAFAR*, NOROUZINASAB YOUSEF
 
* SCHOOL OF INDUSTRIAL ENGINEERING, COLLEGE OF ENGINEERING, UNIVERSITY OF TEHRAN, TEHRAN, IRAN
 
Abstract: 

In this paper, a discount model is proposed to coordinate pricing and ordering decisions in a two-echelon supply chain (SC). Demand is stochastic and price sensitive while lead times are fixed. Decentralized decision making where downstream decides on selling price and order size is investigated. Then, joint pricing and ordering decisions are extracted where both members act as a single entity aim to maximize whole SC profit. Finally, a coordination mechanism based on quantity discount is proposed to coordinate both pricing and ordering decisions simultaneously.
The proposed two-level discount policy can be characterized from two aspects: (1) marketing viewpoint: a retail price discount to increase the demand, and (2) operations management viewpoint: a wholesale price discount to induce the retailer to adjust its order quantity and selling price jointly. Results of numerical experiments demonstrate that the proposed policy is suitable to coordinate SC and improve the profitability of SC as well as all SC members in comparison with decentralized decision making.

 
Keyword(s): TWO-LEVEL DISCOUNT, SUPPLY CHAIN COORDINATION, STOCHASTIC PRICE-SENSITIVE DEMAND, MULTI-ECHELON INVENTORY SYSTEMS
 
References: 
 
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