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Supply chains in the presence of store brands

Author

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  • Fang, Xiang
  • Gavirneni, Srinagesh
  • Rao, Vithala R.

Abstract

Increased competition from store brands is forcing manufacturers to re-evaluate their strategies in regard to pricing and contracting with trade intermediaries. We analyze a supply chain in which a retailer accepts (with the appropriate contractual agreements) a national brand for resale and then determines whether to introduce a store brand, how to price the store brand, and what quantities of the product(s) to order. We show that when the national brand’s cost per unit quality (CPUQ) is larger than the store brand’s CPUQ, then the retailer seeks to introduce the store brand (SB) and the national brand (NB) manufacturer/supplier is unable to deter him from doing so. We find that the efficiency loss in the decentralized supply chain becomes smaller when a store brand is introduced. Recognizing the inadequacy of standard contracts in coordinating this supply chain, we propose a simple minimum order quantity contract that can coordinate this supply chain.

Suggested Citation

  • Fang, Xiang & Gavirneni, Srinagesh & Rao, Vithala R., 2013. "Supply chains in the presence of store brands," European Journal of Operational Research, Elsevier, vol. 224(2), pages 392-403.
  • Handle: RePEc:eee:ejores:v:224:y:2013:i:2:p:392-403 DOI: 10.1016/j.ejor.2012.07.039
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Jun & Guo, Ruey-Shan, 2016. "The D-Day, V-Day, and bleak days of a disruptive technology: A new model for ex-ante evaluation of the timing of technology disruptionAuthor-Name: Chen, Chialin," European Journal of Operational Research, Elsevier, vol. 251(2), pages 562-574.
    2. Jin, Yannan & Wu, Xiaole & Hu, Qiying, 2017. "Interaction between channel strategy and store brand decisions," European Journal of Operational Research, Elsevier, vol. 256(3), pages 911-923.

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