Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes
We examine the problem of developing supply contracts that encourage proper coordination of forecast information and production decisions between a manufacturer and distributor of high fashion, seasonal products operating in a two-mode production environment. The first production mode is relatively cheap but requires a long lead time while the second is expensive but offers quick turnaround. We focus on contracts of the form (w 1 , w 2 , b) where w i is the wholesale price offered for production mode i and b is a return price offered for items left over at the end of the season. We find that such a contract can coordinate the manufacturer and distributor to act in the best interest of the channel. The pricing conditions needed to ensure an efficient solution vary depending on the degree of demand forecast improvement between periods and the manufacturer's access to forecast information. We also examine whether these conditions ensure a Pareto optimal solution with respect to two traditional production settings.
Volume (Year): 46 (2000)
Issue (Month): 11 (November)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wallace B. Crowston & Warren H. Hausman & William R. Kampe, II, 1973. "Multistage Production for Stochastic Seasonal Demand," Management Science, INFORMS, vol. 19(8), pages 924-935, April.
- George R. Murray, Jr. & Edward A. Silver, 1966. "A Bayesian Analysis of the Style Goods Inventory Problem," Management Science, INFORMS, vol. 12(11), pages 785-797, July.
- G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
- Andy A. Tsay, 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives," Management Science, INFORMS, vol. 45(10), pages 1339-1358, October.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
- Sang Hoon Chang & David E. Fyffe, 1971. "Estimation of Forecast Errors for Seasonal-Style-Goods Sales," Management Science, INFORMS, vol. 18(2), pages B89-B96, October.
- Philip H. Hartung, 1973. "A Simple Style Goods Inventory Model," Management Science, INFORMS, vol. 19(12), pages 1452-1458, August.
- Warren H. Hausman & Rein Peterson, 1972. "Multiproduct Production Scheduling for Style Goods with Limited Capacity, Forecast Revisions and Terminal Delivery," Management Science, INFORMS, vol. 18(7), pages 370-383, March.
- Kandel, Eugene, 1996. "The Right to Return," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 329-56, April.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:11:p:1397-1411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.