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Channel coordination under consignment and vendor-managed inventory in a distribution system

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  • Chen, Jen-Ming
  • Lin, I-Chen
  • Cheng, Hung-Liang
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    Abstract

    This paper deals with the problem of coordinating a vertically separated distribution system under vendor-managed inventory and consignment arrangements. We formulate the profit-maximization problem and carry out equilibrium analysis under cooperative and non-cooperative settings. In addition, a revenue-sharing scheme joint with a side-payment is proposed, which leads to Pareto improvements among channel participants. Our analysis reveals that the non-cooperative decentralization tends to price higher and stock less, which leads to a lower channel-wide profit. The consistent bias can be rectified by the dominant, cooperative wholesaler or by using the proposed two-part revenue-sharing mechanism.

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    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 46 (2010)
    Issue (Month): 6 (November)
    Pages: 831-843

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    Handle: RePEc:eee:transe:v:46:y:2010:i:6:p:831-843

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    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description

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    Related research

    Keywords: Channel coordination Vendor-managed inventory Consignment Inventory-level dependent demand Pricing Deterioration;

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    Cited by:
    1. Yu, Yugang & Hong, Zhaofu & Zhang, Linda L. & Liang, Liang & Chu, Chengbin, 2013. "Optimal selection of retailers for a manufacturing vendor in a vendor managed inventory system," European Journal of Operational Research, Elsevier, vol. 225(2), pages 273-284.
    2. Chen, Jen-Ming & Chang, Chia-I, 2012. "The co-opetitive strategy of a closed-loop supply chain with remanufacturing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 387-400.
    3. Bylka, Stanisław, 2013. "Non-cooperative consignment stock strategies for management in supply chain," International Journal of Production Economics, Elsevier, vol. 143(2), pages 424-433.
    4. Glock, Christoph H., 2012. "The joint economic lot size problem: A review," International Journal of Production Economics, Elsevier, vol. 135(2), pages 671-686.

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