Multiple retailer cooperation system analysis

In this paper, we analyze a new cooperative situation applied to supply chain management. Specifically, we study a distribution system where a set of retailers may order a single product from a unique supplier to satisfy a deterministic and constant rate demand of final customers. Each retailer, when ordering a quantity of a product, has to pay a fixed ordering cost which is the same for all the retailers. In addition to the ordering cost, every retailer has to pay a specific cost; this cost may include transportation and all additional charges that depend on the retailer's characteristics. Retailers may choose to cooperate by grouping their orders as a big order. In this case, they realise some cost saving benefits by reducing the sum of ordering cost to only one cost paid by the coalition. In case of cooperation we suppose that there is a decision maker or a warehouse that coordinates the decisions. We suppose that the delivered products are stored in local warehouses where every retailer has to support his own holding cost. In this paper, major differences with existent inventory cooperation situations are highlighted. We use a set of empirical tests to corroborate some useful insights and to raise some relevant questions to address in a future work. Further, an efficient algorithm is proposed to address the difficult question of the coalition generation.