Procurement strategies and coordination mechanism of the supply chain with one manufacturer and multiple suppliers

This paper investigates the coordination mechanism for supply chain with one manufacturer and multiple competing suppliers in the electronic market. We first study two conventional price-only policies, including wholesale price policy and catalog policy, based on the reverse Vickrey auction, and show that both the buyer and the powerful suppliers (with production cost less than a special threshold value) prefer catalog policy to wholesale price policy, and the powerless suppliers prefer wholesale price policy to catalog policy. Simultaneously, neither policy can coordinate the channel composed of the manufacturer and the winning supplier. We also show that a quantity discount policy cannot coordinate the supply chain with competing suppliers unless a kind of restriction is imposed. The aim of the paper is to explore a coordination mechanism, i.e., the price-restricted quantity-discount policy. Pareto analysis indicates that the manufacturer and the winning supplier will realize the ‘win-win’ situation, and the channel can also be coordinated. A key managerial implication of our study is that additional restrictive condition may be necessary to eliminate system inefficiency. Some numerical examples are also given to illustrate management insights.