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Nash game model for optimizing market strategies, configuration of platform products in a Vendor Managed Inventory (VMI) supply chain for a product family

Listed author(s):
  • Yu, Yugang
  • Huang, George Q.
Registered author(s):

    This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials' procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising investments and retail prices to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a dual Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0377-2217(10)00174-8
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    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 206 (2010)
    Issue (Month): 2 (October)
    Pages: 361-373

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    Handle: RePEc:eee:ejores:v:206:y:2010:i:2:p:361-373
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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    1. Thonemann, Ulrich W. & Bradley, James R., 2002. "The effect of product variety on supply-chain performance," European Journal of Operational Research, Elsevier, vol. 143(3), pages 548-569, December.
    2. Yue, Jinfeng & Austin, Jill & Wang, Min-Chiang & Huang, Zhimin, 2006. "Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount," European Journal of Operational Research, Elsevier, vol. 168(1), pages 65-85, January.
    3. Cai, Gangshu (George) & Zhang, Zhe George & Zhang, Michael, 2009. "Game theoretical perspectives on dual-channel supply chain competition with price discounts and pricing schemes," International Journal of Production Economics, Elsevier, vol. 117(1), pages 80-96, January.
    4. Dumrongsiri, Aussadavut & Fan, Ming & Jain, Apurva & Moinzadeh, Kamran, 2008. "A supply chain model with direct and retail channels," European Journal of Operational Research, Elsevier, vol. 187(3), pages 691-718, June.
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    7. Solnon, Christine & Cung, Van Dat & Nguyen, Alain & Artigues, Christian, 2008. "The car sequencing problem: Overview of state-of-the-art methods and industrial case-study of the ROADEF'2005 challenge problem," European Journal of Operational Research, Elsevier, vol. 191(3), pages 912-927, December.
    8. Rajeev Kohli & R. Sukumar, 1990. "Heuristics for Product-Line Design Using Conjoint Analysis," Management Science, INFORMS, vol. 36(12), pages 1464-1478, December.
    9. Yang, Lili & Jones, Bryan F. & Yang, Shuang-Hua, 2007. "A fuzzy multi-objective programming for optimization of fire station locations through genetic algorithms," European Journal of Operational Research, Elsevier, vol. 181(2), pages 903-915, September.
    10. Zhang, Tinglong & Liang, Liang & Yu, Yugang & Yu, Yan, 2007. "An integrated vendor-managed inventory model for a two-echelon system with order cost reduction," International Journal of Production Economics, Elsevier, vol. 109(1-2), pages 241-253, September.
    11. René Caldentey & Lawrence M. Wein, 2003. "Analysis of a Decentralized Production-Inventory System," Manufacturing & Service Operations Management, INFORMS, vol. 5(1), pages 1-17, November.
    12. Yu, Yugang & Chu, Feng & Chen, Haoxun, 2009. "A Stackelberg game and its improvement in a VMI system with a manufacturing vendor," European Journal of Operational Research, Elsevier, vol. 192(3), pages 929-948, February.
    13. Michael J. Fry & Roman Kapuscinski & Tava Lennon Olsen, 2001. "Coordinating Production and Delivery Under a (z, Z)-Type Vendor-Managed Inventory Contract," Manufacturing & Service Operations Management, INFORMS, vol. 3(2), pages 151-173, August.
    14. Huang, Zhimin & Li, Susan X., 2001. "Co-op advertising models in manufacturer-retailer supply chains: A game theory approach," European Journal of Operational Research, Elsevier, vol. 135(3), pages 527-544, December.
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