Coordination of Decentralized Supply Chains: A Literature Review

Due to the fact that the double margin exists in the decentralized supply chain, many papers focus on the coordination of decentralized supply chain. In this paper, we classify these papers into three parts according to the structure of supply chain. The first kind of supply chain consists of one upstream supplier and one downstream retailer. The second one consists of multiple suppliers and a single retailer. The last one refers to the supply chain with multiple suppliers and a single retailer. This paper can enable readers to get the knowledge of existing research on supply chain coordination. We also give some interesting future research concerning this topic

Coordination Strategy of Dual-Channel Supply Chain for Fresh Product Under the Fresh-Keeping Efforts

In the context of high loss in the storage and transportation of fresh agricultural products, in order to help company make reasonable fresh-keeping decisions and reduce losses, we established a leading supplier of fresh agricultural products in two level dual channel supply chain model based on consumer utility function, and using Stackelberg game method to solve the optimal pricing and optimal fresh-keeping decision of fresh agricultural supplier and retailer under centralized decision-making and decentralized decision-making model. Research shows: (1) Under centralized decision-making model, the highest profit does not affect the cooperation and achieve complete coordination regardless of the bargaining power of the retailer; (2) High cost factor of fresh-keeping efforts makes supplier and retailer more inclined to lower prices to attract consumers. (3)The “revenue sharing + fresh-keeping cost sharing” coordination strategy provided by the supplier can increase the respective profits of both parties and achieve complete coordination of the dual-channel supply chain of fresh agricultural products

Pricing Perishables with Uncertain Demand, Substitutes, and Consumer Heterogeneity

Within the marketing window for perishables such as food products, demand uncertainty is complicated by price sensitivity and propensity to postpone purchase that is heterogeneous across consumers. These features pose substantial challenges to retailers when pricing multiple products over time and across consumer segments. Getting the dynamic profile of prices right has implications for performance of vertical food chains ranging from revenues to food waste. This paper proposes an approach to dynamic pricing that is demonstrated to improve performance within this setting

Manufacture’s Production and Pricing Strategies With Carbon Tax Policy and Strategic Customer Behavior

This paper investigates the manufacture’s production and pricing strategies with carbon tax policy and strategic customer behavior, and analyze the impact of carbon tax policy and its parameter on the manufacturer’s optimal strategies and maximum expected profit. We derive the optimal production, pricing strategies and maximum expected profit under the rational expectations equilibrium. The results show that the manufacturer’s optimal production quantity and maximum expected profit are decreasing in carbon tax rate, and the manufacturer’s optimal price is increasing in the carbon tax rate. Compared with the no carbon emission policy scenario, we prove that the manufacturer’s optimal production quantity decreases, the manufacturer’s optimal price increases, the manufacturer’s maximum expected profit decreases, and the carbon tax policy effectively reduces the manufacturer’s carbon emissions

Pricing Perishables

 A key feature of food products is their perishability. Within the short marketing window that characterizes most food and ag products, demand is typically highly stochastic and difficult to predict. This combination of features poses substantial challenges to retailers when pricing products and has implications for performance that ripples through vertical food chains. For many food products, processing to forms that can be preserved and held in inventory has traditionally been used as a means of coping with these conditions, despite its high costs and ancillary risks introduced such as change in product attributes and deterioration. This paper presents an alternative ERM strategy that focuses on dynamic pricing to control the rate of sale for perishable products. The paper considers a retailer that has market power to price and supplies perishable products to a market with substitute products and demand originating from heterogeneous consumers. Perishability implies a finite horizon for the marketing of the products over which demand across market segments of consumers is both dynamic and stochastic. Faced with uncertainty, we suppose the firm has limited information about the stochastic properties of demand and must choose a pricing strategy that projects over the market horizon. This price trajectory represents a key control mechanism to cope with uncertainty of both the perishability of the product and of demand

Pricing Perishables: Robust Price Assurance

As perishable products are worthless at end-of-life, for a given supply prices are often dynamically adjusted to ensure inventory is exhausted at end-of-life. When consumers expect such price reductions, they may strategically time their purchases. These two conditions pose a complex problem for pricing. Given inventory, cost of production is sunk. Thus, the dynamic path for prices must be set to maximize revenues with an eye on inventory take-down as well as to discourage strategic behavior. This problem is further challenged when prices and the extent of consumer strategic behavior are uncertain. This paper presents an approach for pricing a set of perishable products that are highly substitutable, yet differentiated to target a set of consumer segments. We propose and analyze a price assurance scheme as a solution to the strategic behavior of consumers and price uncertainty. We present and evaluate our price assurance approach by comparing two price assurance schemes: i) ex-post price assurance, and ii) ex-ante price assurance to risk neutral dynamic pricing without regard for consumer strategic behavior. These approaches have not to our knowledge been previously considered in our setting of perishables, uncertain consumer strategic behavior, and price uncertainty. Our numerical experiments show that our robust optimization model prevents loss when a firm encounters the worst-case demand and outperforms a risk neutral pricing model. Comparison across our different pricing schemes provides conditions under which particular schemes may dominate others

Robust Dynamic Pricing with Strategic Customers

We consider the canonical revenue management (RM) problem wherein a seller must sell an inventory of some product over a finite horizon via an anonymous, posted price mechanism. Unlike typical models in RM, we assume that customers are forward looking. In particular, customers arrive randomly over time and strategize about their times of purchases. The private valuations of these customers decay over time and the customers incur monitoring costs; both the rates of decay and these monitoring costs are private information. This setting has resisted the design of optimal dynamic mechanisms heretofore. Optimal pricing schemes-an almost necessary mechanism format for practical RM considerations-have been similarly elusive. The present paper proposes a mechanism we dub robust pricing. Robust pricing is guaranteed to achieve expected revenues that are at least within 29% of those under an optimal (not necessarily posted price) dynamic mechanism. We thus provide the first approximation algorithm for this problem. The robust pricing mechanism is practical, since it is an anonymous posted price mechanism and since the seller can compute the robust pricing policy for a problem without any knowledge of the distribution of customer discount factors and monitoring costs. The robust pricing mechanism also enjoys the simple interpretation of solving a dynamic pricing problem for myopic customers with the additional requirement of a novel “restricted sub-martingale constraint” on prices that discourages rapid discounting. We believe this interpretation is attractive to practitioners. Finally, numerical experiments suggest that the robust pricing mechanism is, for all intents, near optimal

Capacity Manipulation and Menus of Two Part Tariff Contract in Supply Chain

In a decentralized supply chain, raw material supply uncertainty, phantom orders of downstream firm as well as huge investment sunk costs leads to supplier's production capacity manipulation behavior. A supply chain consisting of a supplier and a retailer who faces a newsvendor problem is considered. The impact of supplier's production capacity manipulation on retailer's purchase decision is discussed. The retailer can adopt a menu of two part tariff contract regarding the terms of trade and capacity. Both supplier and retailer have prior belief about counterpart decision behavior. Then, we construct menus of two part tariff contract offered by the retailer to the supplier who has production capacity manipulation and type dependent reservation profits. Our results show that when capacity difference between type H supplier and type L supplier is higher than a critical threshold, the retailer offers two kinds of optimal menus of two part tariff contract in view of reservation profits difference between the type H supplier and type L supplier, and that both supplier and retailer's prior belief about counterpart decision behavior affect optimal menus of two part tariff contract. Finally, a case study shows our conclusions

Double moral hazard in a supply chain with consumer learning

When an innovative product is introduced into the market, consumers are often uncertain about the product value. Over time they may learn the value of product. This paper studies the impact of consumer learning on the firms' marketing efforts and revenue sharing strategies in a supply chain that sells an innovative product to consumers over multiple periods. Both the supplier and the retailer can exert marketing efforts to influence consumers' beliefs about the product and improve the product demand. Because the supplier and the retailer are independent entities with self-interested objectives, double moral hazard exists in the supply chain. We find that the supplier and retailer exert more marketing efforts in the presence of consumer learning but the marketing efforts decrease as consumers learn more about the product. We also examine the revenue-sharing strategies and find that supplier shares more revenue to the retailer when they cooperate for a longer time horizon. The total profit of the supply chain may be higher when there is information asymmetry between the supplier and retailer. This finding suggests that information sharing is not always beneficial to improve supply chain coordination

Perishable Food Waste Reduction Through Technological Implementation at the Retail Level of the Food Supply Chain

Food waste has become a disaster of global proportion that the world can no longer turn a blind eye to. This paper aims to reduce food waste at the retail level of the food supply chain by recommending and quantifying the effects of current technology that can be implemented in traditional supermarkets. This research recommends that retailers implement electronic shelf labels in stores and employ dynamic pricing of perishable products, leading to reduction of food waste. No prior research had considered the primary goal of reducing food waste while preserving retailer profit through technological implementation. This paper quantifies the effects of implementing this technology and provides economic justification of the required investment through the calculation of profitability metrics and discussion of environmental regulations retailers will soon have to abide by. Our results indicate, even in the most conservative of scenarios, that the payback period for full implementation of electronic shelf labels will be less than or slightly over one year and the return on investment is high in all situations discussed. Sensitivity analyses of labor costs, revenue, and profitability ratios are illustrated to provide a full breadth of these results