Yuanguang Zhong

Coordination of cooperative advertising models in a one-manufacturer two-retailer supply chain system

This paper considers cooperative advertising issues of a monopolistic manufacturer with competing duopolistic retailers. Four possible game structures (or power configurations), i.e., Stackelberg-Cournot, Stackelberg-Collusion, Nash-Cournot and Nash-Collusion, are discussed. Under each of four game structures, we develop a decision model for the three partners to design the optimal cooperative advertising policies. Through a comparison among the four models, we reveal how cooperative advertising policies and profits of all participants are affected by various competitive behaviors, and then determine whether the partners have any incentives to transit to a different structure. Also presented in the paper are a centralized decision model and a proposed cost-sharing contract, which is able to achieve perfect coordination of the considered channel, where the utility of risk preference is used to determine the fraction of local advertising costs shared by the manufacturer.

An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space

This paper considers a two-echelon supply chain where a supplier sells a single product through a retailer, who faces an inventory-dependent demand. The supplier hopes to incentive the retailer to order more items by offering trade credit. The retailer places the ordered items on the display shelf (DS) with limited space and stocks the remaining items (if any) that exceed the shelf capacity in his/her backroom/warehouse (BW). From the supplier’s perspective, we focus mainly on under which conditions the supplier should offer trade credit and how he/she should design such trade credit policy and corresponding ordering policy to obtain much more benefits. From the retailer’s perspective, we discuss whether the retailer needs BW and exactly how many items need to be stocked in BW when the supplier offers trade credit. We formulate a “supplier-Stackelberg” game model, from which we obtain the conditions under which the presented simple trade credit policy not only increases the overall chain profit but also each member’s profit. We also show that the trade credit policy is always more beneficial to the retailer than to the supplier if it is offered.

How to make the replenishment and payment strategy under flexible two-part trade credit

In the existing inventory models concerning the two-part trade credit, a common assumption is that the retailer either pays for all the ordered items within a short permissible delay period and receives a cash discount or pays for all the ordered items within a long permissible delay period at the regular price. In this paper, this unrealistic assumption is relaxed. We assume that the retailer may pay any fraction of the purchase cost within the short permissible delay period and receives a cash discount and then the rest is paid within the long permissible delay period. A decision model is proposed for a retailer to determine the optimal ordering policy and payment plan. The closed-form optimal solution to the model is developed and analyzed. Numerical studies show that a retailer can obtain more benefits from the proposed payment plan than from the extreme payment plan in the existing literature.

The model and algorithm for determining optimal ordering/trade-credit policy of supply chains

Abstract This paper develops a model for determining ordering/trade-credit policy of a supply chain, where one supplier sells a product to a retailer, who faces a deterministic demand, and may offer the retailer two types of trade credit contracts: a “one-part” or a “two-part” contract. We discuss the existence of the optimal solution to the model, and provide a simple algorithm for finding the optimal ordering and trade credit policy of two members. We specify the conditions under which it is beneficial in reducing operational cost for the supplier to offer the two trade credit contracts. Through numerical experiments, we reveal that it is more superior in reducing operational cost for the supplier to offer a two-part credit than to offer a one-part credit, which can be extended to a multi-part credit. The sensitivity analysis is presented at the end of the paper.

A pricing/ordering model for a dyadic supply chain with buyback guarantee financing and fairness concerns

The paper investigates pricing/ordering issues in a dyadic supply chain, in which a core supplier sells products through a budget-constrained retailer. The retailer faces stochastic demand and is fairness-concerned as well. If needed, the retailer can get financing support from bank by means of buyback guarantee financing (BGF) mode, which is often used in China. By introducing Nash bargaining solution as the fairness reference point, we formulate the retailer’s fairness-concerned utility function and develop a two-echelon pricing/ordering game model. We then study the combined impacts of fairness concerns and BGF on two members’ equilibrium strategies and supply chain performance. We also discuss the corresponding issues under no budget constraint, no financing service and bank financing. Our results show that: (1) two members’ equilibrium strategies are significantly influenced by the retailer’s fairness-concerned behaviour and initial budget; (2) as compared to no budget constraint, BGF can bring the whole supply chain more performance, which means that BGF can yield value-added; (3) When the retailer takes the risk of uncertain market solely, the retailer’s fairness concerns are beneficial for supply chain to improve the performance.

Pricing and alliance selection for a dominant retailer with an upstream entry

We consider the problem of pricing and alliance selection that a dominant retailer in a two-echelon supply chain decides when facing a potential upstream entry. The two-echelon supply chain consists of a dominant retailer, an incumbent supplier and an “incursive” vendor, where both the incumbent supplier and “incursive” vendor sell substitutable products to the common market through the dominant retailer. Our objective is to discuss whether the dominant retailer should sell the “incursive” vendors products and, if so, how the dominant retailer strategically selects the alliance structure to maximize his/her own profit. We also present how all the members make their pricing decisions and analyze the impact of competitive intensity between two products on their pricing strategies after the entry of the vendor in possible alliance settings. Our results show that: (1) the introduction of the upstream vendor always benefits the retailer, and more interestingly, benefits the incumbent suppler in many cases, too; (2) in this paper, we define the competitive ability as the price dominance of one player over another when both are competing for the same customer market, if the price competition between the incumbent supplier and the “incursive” vendor is relatively fierce, the dominant retailer should ally with the one who has a relatively strong competitive ability rather than the other who has a relatively weak competitive ability; otherwise, he/she should ally with both upstream members. Finally, using numerical examples, we analyze the impact of different parameters and provide some management insights.

Resource Pooling and Allocation Policies to Deliver Differentiated Service

Resource pooling strategies have been widely used in industry to match supply with demand. However, effective implementation of these strategies can be challenging. Firms need to integrate the heterogeneous service level requirements of different customers into the pooling model and allocate the resources (inventory or capacity) appropriately in the most effective manner. The traditional analysis of inventory pooling, for instance, considers the performance metric in a centralized system and does not address the associated issue of inventory allocation. Using Blackwell’s Approachability Theorem, we derive a set of necessary and sufficient conditions to relate the fill rate requirement of each customer to the resources needed in the system. This provides a new approach to studying the value of resource pooling in a system with differentiated service requirements. Furthermore, we show that with “allocation flexibility,” the amount of safety stock needed in a system with independent and identically distribut...

Optimal advertising/ordering policy and finance mode selection for a capital-constrained retailer with stochastic demand

In this paper, we discuss how a capital-constrained retailer determines his optimal advertising/ordering policy and selects his financing mode when he faces the following modes: no financing service, bank financing, and supplier/mixed financing. For each mode, we construct an optimization model and present a method for how the retailer determines his corresponding optimal advertising and ordering policies in the terms of his initial capital level. Furthermore, we derive the conditions of retailer selecting the optimal financing mode based on both his initial capital level and the interest rates of the financing services. We show that when the retailer is relatively “poor,” he prefers bank financing mode if the bank interest rate is lower than the supplier, otherwise mixed financing mode; when he is moderately “rich,” he only selects supplier financing mode if the bank interest rate is greater than a threshold value and otherwise bank financing mode; however, when he is relatively “rich,” he always chooses bank financing mode even if the bank interest rate is higher than the supplier. We conduct numerical studies to illustrate the theoretical results and find adopting financing service significantly improves the retailer’s performance especially when he has relatively low initial capital level.

Two-dimensional aggregate warranty demand forecasting under sales uncertainty

ABSTRACT Capital-intensive products, such as automobiles and heavy equipment, are often sold under a two-dimensional warranty policy considering both age and usage. As the products are sold to customers intermittently, the sales process is usually performed under uncertainty. This stochastic nature presents difficulties in predicting the warranty demand over time. The existing literature on two-dimensional warranty only focuses on warranty demand of a single unit, which overlooks the effect of the sales dynamics on the total warranty claims of sold units. To address this issue, from a new warranty analysis perspective, this study develops a general forecasting technique for the aggregate repair demand of all units sold up to a given time period. The stochastic sales process is modeled by a non-homogeneous Poisson process, and the product failures are captured by a two-dimensional failure process with minimal repair. When the first time-to-failure follows a bivariate exponential distribution, the expected aggregate repair demand for a given period of time is derived in an analytical form. Numerical experiments are presented to show the applicability and flexibility of our model in estimating the warranty demands with time-varying sales processes.

Optimal cooperative advertising and ordering policies for a two-echelon supply chain

Abstract This paper considers a two-echelon supply chain consisting one manufacturer and multiple retailers whose demands are under uncertainty. The retailers order the same product from the manufacturer, while the demands are affected by the manufacturer’s brand adverting and the retailers’ local advertising strategies. For this setting, the cooperative issues in advertising are studied among the supply chain members. Two practical problems are investigated via the cooperative game approach, where the coalition’s characteristic values are indicated by the associated optimal expected profits. We analyze a mixed manufacturer-retailers advertising cooperation problem, in which the manufacturer acts as a leader and plays the Stackelberg game with the retailer coalition. We obtain some interesting managerial insights from the analysis and show that the core of each game is nonempty. To guarantee the stabilities of the proposed games, two easy-to-implement allocation policies of the expected total profits are provided, for which the earnings assigned to the manufacturer and the retailers are reasonably fair.