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Risk pooling strategy in a multi-echelon supply chain with price-sensitive demand

Author

Listed:
  • Yue Dai
  • Shu-Cherng Fang
  • Xiaoli Ling
  • Henry Nuttle

Abstract

This paper studies a nonstationary inventory and pricing problem. We consider a two-echelon supply chain with one supplier and two retailers, in which the supplier carries all inventory to supply the retailers. Both the reserved and pooled inventory systems are analyzed. Results with normally distributed demands are compared. Assuming the random demand at each retailer is price-sensitive, we further consider the cases when the retailers have and do not have service level requirements. We start with analyzing inventory and pricing strategies for the supplier in a one-period scenario. Then we extend our analysis to both the backlogging and lost-sale scenarios in an infinite planning horizon. Copyright Springer-Verlag 2008

Suggested Citation

  • Yue Dai & Shu-Cherng Fang & Xiaoli Ling & Henry Nuttle, 2008. "Risk pooling strategy in a multi-echelon supply chain with price-sensitive demand," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 67(3), pages 391-421, June.
    • Handle: RePEc:spr:mathme:v:67:y:2008:i:3:p:391-421
    DOI: 10.1007/s00186-007-0203-8
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    References listed on IDEAS

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    1. Andrew J. Clark & Herbert Scarf, 2004. "Optimal Policies for a Multi-Echelon Inventory Problem," Management Science, INFORMS, vol. 50(12_supple), pages 1782-1790, December.
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    4. Yunzeng Wang & Li Jiang & Zuo-Jun Shen, 2004. "Channel Performance Under Consignment Contract with Revenue Sharing," Management Science, INFORMS, vol. 50(1), pages 34-47, January.
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    6. Fernando Bernstein & Awi Federgruen, 2003. "Pricing and Replenishment Strategies in a Distribution System with Competing Retailers," Operations Research, INFORMS, vol. 51(3), pages 409-426, June.
    7. Yue Dai & Xiuli Chao & Shu-Cherng Fang & Henry Nuttle, 2005. "Game Theoretic Analysis of a Distribution System with Customer Market Search," Annals of Operations Research, Springer, vol. 135(1), pages 223-228, March.
    8. Ravi Anupindi & Yehuda Bassok, 1999. "Centralization of Stocks: Retailers vs. Manufacturer," Management Science, INFORMS, vol. 45(2), pages 178-191, February.
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    10. Serguei Netessine & Nils Rudi, 2006. "Supply Chain Choice on the Internet," Management Science, INFORMS, vol. 52(6), pages 844-864, June.
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    Cited by:

    1. Erhan Kesen, Saadettin & Kanchanapiboon, Atipol & Das, Sanchoy K., 2010. "Evaluating supply chain flexibility with order quantity constraints and lost sales," International Journal of Production Economics, Elsevier, vol. 126(2), pages 181-188, August.
    2. Edirisinghe, Chanaka & Atkins, Derek, 2017. "Lower bounding inventory allocations for risk pooling in two-echelon supply chains," International Journal of Production Economics, Elsevier, vol. 187(C), pages 159-167.
    3. Peeyush Vats & Gunjan Soni & Ajay Pal Singh Rathore & Surya Prakash Yadav, 2019. "A demand aggregation approach for inventory control in two echelon supply chain under uncertainty," OPSEARCH, Springer;Operational Research Society of India, vol. 56(3), pages 840-868, September.

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