Unfair allocation of gains under the Equal Price allocation method in purchasing groups

Certain purchasing groups do not flourish. A supposed reason for this is a creeping dissatisfaction among various members of a group with the allocation of the cooperative gains. In this paper, we analyze unfairness resulting from using the commonly used Equal Price (EP) method for allocating gains under the assumption of continuous quantity discounts. We demonstrate that this unfairness is caused by neglecting a particular component of the added value of individual group members. Next, we develop two fairness ratios and tie these to fairness properties from cooperative game theory. The ratios show among other things that being too-big a player in a purchasing group can lead to decreasing gains. They can be used to assess if EP is an unfair method in specific situations. Finally, we discuss measures a purchasing group could consider in order to attenuate perceived unfairness. Thereby, the group may improve its stability and prosperity

Leader-follower Game in VMI System with Limited Production Capacity Considering Wholesale and Retail Prices

VMI (Vendor Managed Inventory) is a widely used cooperative inventory policy in supply chains in which each enterprise has its autonomy in pricing. This paper discusses a leader-follower Stackelberg game in a VMI supply chain where the manufacturer, as a leader, produces a single product with a limited production capacity and delivers it at a wholesale price to multiple different retailers, as the followers, who then sell the product in dispersed and independent markets at retail prices. An algorithm is then developed to determine the equilibrium of the Stackelberg game. Finally, a numerical study is conducted to understand the influence of the Stackelberg equilibrium and market related parameters on the profits of the manufacturer and its retailers. Through the numerical example, our research demonstrates that: (a) the market related parameters have significant influence on the manufacturer’ and its retailers’ profits; (b) a retailer’s profit may not be necessarily lowered when it is charged with a higher inventory cost by the manufacturer; (c) the equilibrium of the Stackelberg equilibrium benefits the manufacturer.Stackelberg Game;Supply Chain;Vendor Managed Inventory

Leader-follower Game in VMI System with Limited Production Capacity Considering Wholesale and Retail Prices

VMI (Vendor Managed Inventory) is a widely used cooperative inventory policy in supply chains in which each enterprise has its autonomy in pricing. This paper discusses a leader-follower Stackelberg game in a VMI supply chain where the manufacturer, as a leader, produces a single product with a limited production capacity and delivers it at a wholesale price to multiple different retailers, as the followers, who then sell the product in dispersed and independent markets at retail prices. An algorithm is then developed to determine the equilibrium of the Stackelberg game. Finally, a numerical study is conducted to understand the influence of the Stackelberg equilibrium and market related parameters on the profits of the manufacturer and its retailers. Through the numerical example, our research demonstrates that: (a) the market related parameters have significant influence on the manufacturer’ and its retailers’ profits; (b) a retailer’s profit ma

Coordinating pricing and inventory decisions in a multi-level supply chain: A game-theoretic approach

This paper concerns coordination of enterprise decisions such as suppliers and components selection, pricing and inventory in a multi-level supply chain composed of multiple suppliers, a single manufacturer and multiple retailers. The problem is modeled as a three-level dynamic non-cooperative game. Analytical and computational methods are developed to determine the Nash equilibrium of the game. Finally, a numerical study in computer industry is conducted to understand the influence of the market scale parameter and the components selection strategy on the optimal decisions and profits of the supply chain as well as its constituent members. Several research findings have been obtained. © 2010 Elsevier Ltd.link_to_subscribed_fulltex

PRODUCTION PLANNING MULTI-PRODUCT AND MULTI-MACHINE PROBLEMS IN ORDER TO MAXIMIZE THE ECONOMIC PERFOMANCE

Este artigo propõe um novo método que visa à maximização do resultado econômico operacional, através do planejamento de produção. O modelo utiliza um algoritmo de otimização que envolve quatro áreas de análise: mercado, produção, custos e por fim o resultado econômico. O objetivo é a maximização do lucro. A aplicação do modelo ocorre em uma empresa de manufatura que tem se caracterizado por alta variabilidade na definição dos preços de venda. Os resultados deste estudo indicam que pequenas variações nos preços de venda podem comprometer substancialmente os lucros globais do sistema produtivo

Development of an integrated discounting strategy based on vendors’ expectations using FAHP and fuzzy goal programming

The main goal of a company is to increase its market share and total profits at the same time. However, these two objectives conflict if discount rates are applied to vendors. The objective of this paper is to develop an integrated discounting strategy method to effectively manage the trans­actions of the vendors by determining the optimum discount rates which balance the increase on the market share and the total profit. With the proposed methodology which utilizes fuzzy analytic hierarchy process and fuzzy goal programming, determination of the discount rates of each vendor under different discounting strategies is facilitated. This enables the vendors to choose the most suitable discounting strategy with the best applicable discount rate and enables the managers to predict the transactions of the vendors. The proposed method is validated with a numerical study conducted on a pilot region of an international company. First published online: 07 Mar 201

Buyer vendor coordination models in supply chain management,

Abstract Coordination between two different business entities is an important way to gain competitive advantage as it lowers supply chain cost. This paper reviews literature dealing with buyer vendor coordination models that have used quantity discount as coordination mechanism under deterministic environment and classified the various models. An effort has also been made to identify critical issues and scope of future research

The floating contract between risk-averse supply chain partners in a volatile commodity price environment

In this dissertation, two separate but closely related decision making problems in environments of volatile commodity prices are addressed. In the first problem, a risk-averse commodity user\u27s purchasing policy and his risk-neutral supplier\u27s pricing decision, where the user can purchase his needs through contract with his supplier as well as directly from the spot market, are analyzed. The commodity user is assumed to be the supplier\u27s sole client, and the supplier can always expand capacity, at a cost to the user, to accommodate the user\u27s demand in excess of initially reserved capacity. In the more generalized second problem, both parties (commodity user and supplier) are assumed to be risk averse, and both can directly access the spot market. In addition to making pricing decisions, the supplier is also faced with the challenge of establishing the right combination of in-house production and spot market engagements to manage her risk of exposure to spot price volatility under the contract. While the supplier has a frictionless buy and sell access to the spot market, the user can only access this market for buying purposes and incurs an access fee that is linearly increasing in the purchased volume. In both problems, by adopting the mean-variance criterion to reflect aversion to risk, the decisions of both parties are explicitly characterized. Based on analytical results and numerical studies, managerial insights as to how changes in the model\u27s parameters would affect each party\u27s decisions are offered at length, and the implications of these results to the manager are discussed. A focal point for the dissertation is the consideration of a floating contract, the landing price of which is contingent on the realization of the commodity\u27s spot market price at the time of delivery. It was found that if properly designed, not only can this dynamic pricing arrangement strategically position a long-term supplier against spot market competition, but it also has the added benefit of leading to improved supply chain expected profits compared to a locked-in contract price setting. Another key finding is that when making her pricing decisions, the supplier runs the risk of overestimating the commodity user\u27s vulnerability at higher levels of the user\u27s aversion to risk as well as at higher volatility of spot prices