IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v132y2011i2p230-239.html
   My bibliography  Save this article

Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain

Author

Listed:
  • Wang, Qinan
  • Chay, Yiowmin
  • Wu, Zhang

Abstract

We consider a decentralized supply chain, whereby a supplier sells a product to a group of independent buyers, and develop a strategy for the supplier to offer an all-units price discount or cash rebate for orders that are synchronized with its replenishments. As synchronized orders can be met with inventory directly from receiving to shipping without warehousing, the proposed strategy streamlines system inventory flows to minimize inventory and, hence, the related costs. On the other hand, by increasing the replenishment interval of the supplier, the proposed strategy is able to induce buyers to order in large quantities and hence achieve the objectives of quantity discounts. We show that the proposed strategy can achieve nearly optimal (minimum) system cost, and is much more effective than the existing coordination strategies for decentralized supply chains in the literature.

Suggested Citation

  • Wang, Qinan & Chay, Yiowmin & Wu, Zhang, 2011. "Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 132(2), pages 230-239, August.
    • Handle: RePEc:eee:proeco:v:132:y:2011:i:2:p:230-239
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527311001885
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Qinan Wang, 2001. "Coordinating Independent Buyers in a Distribution System to Increase a Vendor's Profits," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 337-348, May.
    2. Z. Kevin Weng, 1995. "Channel Coordination and Quantity Discounts," Management Science, INFORMS, vol. 41(9), pages 1509-1522, September.
    3. Leroy B. Schwarz, 1973. "A Simple Continuous Review Deterministic One-Warehouse N-Retailer Inventory Problem," Management Science, INFORMS, vol. 19(5), pages 555-566, January.
    4. Robert J. Dolan, 1987. "Quantity Discounts: Managerial Issues and Research Opportunities," Marketing Science, INFORMS, vol. 6(1), pages 1-22.
    5. Hau L. Lee & Meir J. Rosenblatt, 1986. "A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits," Management Science, INFORMS, vol. 32(9), pages 1177-1185, September.
    6. James P. Monahan, 1984. "A Quantity Discount Pricing Model to Increase Vendor Profits," Management Science, INFORMS, vol. 30(6), pages 720-726, June.
    7. Robin Roundy, 1989. "Rounding Off to Powers of Two in Continuous Relaxations of Capacitated Lot Sizing Problems," Management Science, INFORMS, vol. 35(12), pages 1433-1442, December.
    8. Peter L. Jackson & William L. Maxwell & John A. Muckstadt, 1988. "Determining Optimal Reorder Intervals in Capacitated Production-Distribution Systems," Management Science, INFORMS, vol. 34(8), pages 938-958, August.
    9. John A. Muckstadt & Robin O. Roundy, 1987. "Multi-Item, One-Warehouse, Multi-Retailer Distribution Systems," Management Science, INFORMS, vol. 33(12), pages 1613-1621, December.
    10. Stephen C. Graves & Leroy B. Schwarz, 1977. "Single Cycle Continuous Review Policies for Arborescent Production/Inventory Systems," Management Science, INFORMS, vol. 23(5), pages 529-540, January.
    11. Robin Roundy, 1985. "98%-Effective Integer-Ratio Lot-Sizing for One-Warehouse Multi-Retailer Systems," Management Science, INFORMS, vol. 31(11), pages 1416-1430, November.
    12. Viswanathan, S. & Piplani, Rajesh, 2001. "Coordinating supply chain inventories through common replenishment epochs," European Journal of Operational Research, Elsevier, vol. 129(2), pages 277-286, March.
    13. Nihat Altintas & Feryal Erhun & Sridhar Tayur, 2008. "Quantity Discounts Under Demand Uncertainty," Management Science, INFORMS, vol. 54(4), pages 777-792, April.
    14. Robin Roundy, 1986. "A 98%-Effective Lot-Sizing Rule for a Multi-Product, Multi-Stage Production / Inventory System," Mathematics of Operations Research, INFORMS, vol. 11(4), pages 699-727, November.
    15. Bellantuono, Nicola & Giannoccaro, Ilaria & Pontrandolfo, Pierpaolo & Tang, Christopher S., 2009. "The implications of joint adoption of revenue sharing and advance booking discount programs," International Journal of Production Economics, Elsevier, vol. 121(2), pages 383-394, October.
    16. Paul Iyogun & Derek Atkins, 1993. "A Lower Bound and an Efficient Heuristic for Multistage Multiproduct Distribution Systems," Management Science, INFORMS, vol. 39(2), pages 204-217, February.
    17. Fernando Bernstein & Awi Federgruen, 2003. "Pricing and Replenishment Strategies in a Distribution System with Competing Retailers," Operations Research, INFORMS, vol. 51(3), pages 409-426, June.
    18. Li, Xiuhui & Wang, Qinan, 2007. "Coordination mechanisms of supply chain systems," European Journal of Operational Research, Elsevier, vol. 179(1), pages 1-16, May.
    19. Fangruo Chen & Awi Federgruen & Yu-Sheng Zheng, 2001. "Coordination Mechanisms for a Distribution System with One Supplier and Multiple Retailers," Management Science, INFORMS, vol. 47(5), pages 693-708, May.
    20. Arshinder & Kanda, Arun & Deshmukh, S.G., 2008. "Supply chain coordination: Perspectives, empirical studies and research directions," International Journal of Production Economics, Elsevier, vol. 115(2), pages 316-335, October.
    21. repec:inm:ormnsc:v:30:y:1984:i:12:p:1524-1539(2 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ata Allah Taleizadeh & Alireza Mahmoudzade Varzi & Alireza Amjadian & Mahsa Noori-daryan & Ioannis Konstantaras, 2023. "How cash-back strategy affect sale rate under refund and customers’ credit," Operational Research, Springer, vol. 23(1), pages 1-69, March.
    2. Zhou, Yong-Wu & Cao, Bin & Tang, Qinshen & Zhou, Wenhui, 2017. "Pricing and rebate strategies for an e-shop with a cashback website," European Journal of Operational Research, Elsevier, vol. 262(1), pages 108-122.
    3. Lifeng Mu & Xin Tang & Vijayan Sugumaran & Wei Xu & Xiangyang Sun, 2023. "Optimal rebate strategy for an online retailer with a cashback platform: commission-driven or marketing-based?," Electronic Commerce Research, Springer, vol. 23(1), pages 475-510, March.
    4. Ata Allah Taleizadeh & Alireza Mahmoudzade Varzi & Hadi Akbarzadeh Khorshidi & Mahsa Noori-daryan, 2024. "Retail pricing, cashback and refund decisions in a supply chain with e-shop and direct channels," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(2), pages 140-163, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Xiuhui & Wang, Qinan, 2007. "Coordination mechanisms of supply chain systems," European Journal of Operational Research, Elsevier, vol. 179(1), pages 1-16, May.
    2. Qinan Wang, 2001. "Coordinating Independent Buyers in a Distribution System to Increase a Vendor's Profits," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 337-348, May.
    3. Qinan Wang, 2004. "Coordinating independent buyers with integer‐ratio time coordination and quantity discounts," Naval Research Logistics (NRL), John Wiley & Sons, vol. 51(3), pages 316-331, April.
    4. Qinan Wang & Ruifang Wang, 2005. "Quantity discount pricing policies for heterogeneous retailers with price sensitive demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 52(7), pages 645-658, October.
    5. Zhou, Yong-Wu, 2009. "Two-echelon supply chain coordination through the unified number of annual orders," International Journal of Production Economics, Elsevier, vol. 117(1), pages 162-173, January.
    6. Yu Xia & Bintong Chen & Panos Kouvelis, 2008. "Market-Based Supply Chain Coordination by Matching Suppliers' Cost Structures with Buyers' Order Profiles," Management Science, INFORMS, vol. 54(11), pages 1861-1875, November.
    7. Mutlu, Fatih & Çetinkaya, Sıla, 2020. "Supplier–carrier–buyer channels: Contractual pricing for a carrier serving a supplier–buyer partnership," International Journal of Production Economics, Elsevier, vol. 230(C).
    8. Albert Y. Ha & Lode Li & Shu-Ming Ng, 2003. "Price and Delivery Logistics Competition in a Supply Chain," Management Science, INFORMS, vol. 49(9), pages 1139-1153, September.
    9. Zhou, Yong-Wu & Min, Jie & Goyal, Suresh K., 2008. "Supply-chain coordination under an inventory-level-dependent demand rate," International Journal of Production Economics, Elsevier, vol. 113(2), pages 518-527, June.
    10. Adeinat, Hamza & Pazhani, Subramanian & Mendoza, Abraham & Ventura, Jose A., 2022. "Coordination of pricing and inventory replenishment decisions in a supply chain with multiple geographically dispersed retailers," International Journal of Production Economics, Elsevier, vol. 248(C).
    11. Sarmah, S.P. & Acharya, D. & Goyal, S.K., 2006. "Buyer vendor coordination models in supply chain management," European Journal of Operational Research, Elsevier, vol. 175(1), pages 1-15, November.
    12. Wang, Huihui & Yu, Yimin & Zhang, Wei & Hua, Zhongsheng, 2019. "Procurement strategies for lost-sales inventory systems with all-units discounts," European Journal of Operational Research, Elsevier, vol. 272(2), pages 539-548.
    13. Nihat Altintas & Feryal Erhun & Sridhar Tayur, 2008. "Quantity Discounts Under Demand Uncertainty," Management Science, INFORMS, vol. 54(4), pages 777-792, April.
    14. Dimitris Zissis & George Ioannou & Apostolos Burnetas, 2020. "Coordinating Lot Sizing Decisions Under Bilateral Information Asymmetry," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 371-387, February.
    15. Hsieh, Chung-Chi & Liu, Yu-Te & Wang, Wei-Ming, 2010. "Coordinating ordering and pricing decisions in a two-stage distribution system with price-sensitive demand through short-term discounting," European Journal of Operational Research, Elsevier, vol. 207(1), pages 142-151, November.
    16. Chu, Chi-Leung & Leon, V. Jorge, 2008. "Single-vendor multi-buyer inventory coordination under private information," European Journal of Operational Research, Elsevier, vol. 191(2), pages 485-503, December.
    17. Geunes, Joseph & Romeijn, H. Edwin & van den Heuvel, Wilco, 2016. "Improving the efficiency of decentralized supply chains with fixed ordering costs," European Journal of Operational Research, Elsevier, vol. 252(3), pages 815-828.
    18. Fangruo Chen & Awi Federgruen & Yu-Sheng Zheng, 2001. "Coordination Mechanisms for a Distribution System with One Supplier and Multiple Retailers," Management Science, INFORMS, vol. 47(5), pages 693-708, May.
    19. Halati, Abolhassan & He, Yuanjie, 2010. "Analysis of supply chains with quantity based fixed incentives," European Journal of Operational Research, Elsevier, vol. 202(1), pages 214-222, April.
    20. Fangruo Chen & Awi Federgruen & Yu-Sheng Zheng, 2001. "Near-Optimal Pricing and Replenishment Strategies for a Retail/Distribution System," Operations Research, INFORMS, vol. 49(6), pages 839-853, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:132:y:2011:i:2:p:230-239. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.