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

Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.supply chain management;nash game model;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

Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications

Nash game model for optimizing market strategies, configuration of platform products in a Vendor Managed Inventory (VMI) supply chain for a product family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials' procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising investments and retail prices to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a dual Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications. © 2010 Elsevier B.V. All rights reserved.postprin

The influence of promotional activity on supply chain stability: a fast moving consumer goods (FMCG) perspective.

Master of Commerce. University of KwaZulu-Natal, Pietermaritzburg, 2014.Today, most sales are stimulated at the point of purchase, so sales promotions are becoming a crucial element of any marketing campaign. The consequence of these promotions is the creation of unpredictable demand. The resultant instability has been termed the “Bullwhip Effect” (BWE). The BWE has a negative effect on business performance as it creates information distortions that cause excessive inventory holdings, higher overall costs, poor customer service and lost sales. An important strategy to achieve a smooth flowing supply chain is to mitigate or preferably eliminate the BWE. The aim of this research was to monitor the stock levels of a high value product flowing through the supply chain to determine whether marketing activities, such as promotions, contribute to increased instability in the chain. The study followed a case study approach and analysed the business activities of consumer packaged goods company (CPGC) “X” promoting their product “X”, an item of high value, with retailer “X”. The promotion was monitored in three phases. The phases included pre-promotion planning, execution of the promotion and post promotion analysis. The researcher employed both qualitative and quantitative research methods. The research established that the ROI on the promotion was greater than the target and that the retailer made an additional profit. However, when the assessment of ROI included more of the supply chain, there was a negative operating profit due to excess upstream inventory. The study confirmed that promotional activities contribute to the BWE and that this effect may be more pronounced with products of higher value. The phenomenon worsened as the distance of supply chain nodes from the real demand increased. This caused a major shift in ordering patterns and an altered total inventory pipe fill in the chain. The recommendations arising from this study are that the CPGC and retailer should implement a true scorecard and a joint business plan for those brands that have products of high value. Subsequently, a vendor managed inventory (VMI) system should be implemented. This will remove the retailer’s need to forecast and may prevent unstable ordering and delays due to cost avoidance. Shrinkage will be reduced as the CPGC would directly own, control and supply stock in the retailer’s DCs

An analysis of current supply chain best practices in the retail industry with case studies of Wal-Mart and Amazon.com

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2005.Includes bibliographical references (leaves 184-188).In support of the Supply Chain 2020 Project at MIT, this thesis identifies current best practices in retail industry supply chains, with a specific focus on mass merchandising and Internet retailing. Using a survey of current literature for context and industry expert interviews, this thesis assesses the current state of the retail industry and analyzes case studies of Wal-Mart and Amazon.com to illustrate retail supply chain best practices. Topics covered in each case study include supply chain strategy and business strategy linkage, operating models, supply chain design, replenishment and distribution processes, and ongoing supply chain improvement initiatives. Wal-Mart and Amazon.com are found to have very different supply chains in terms of structure and processes, based on their different operating models. However, there are many supply chain themes that are common among the two companies. Both case study companies have supply chain strategies, designs, and processes that clearly support their business strategies. Additionally, these companies tailor processes to fit specific product and demand profiles, collaborate extensively with supply chain partners, invest significantly in information technology, focus on operational efficiency, and leverage scale to facilitate competitive advantage through supply chain management. Based on the common and unique aspects of Wal- Mart and Amazon.com's supply chains, we provide recommendations for the potential transferability of Wal-Mart and Amazon.com practices within the retail industry and to other industries.by Colby Ronald Chiles and Marguarette Thi Dau.M.Eng.in Logistic