Ordering and Pricing Policies under Vendor Managed Inventory and Consignment Arrangements

10.6186/IJIMS.2010.21.4.5

Jen-Ming Chen；I-Chen Lin

Channel Coordination ； Game theory ； Vendor Managed Inventory ； Consignment ； Pareto Improvement

International Journal of Information and Management Sciences

21：4（2010 / 12 / 01）

453 - 468

英文

This paper addresses joint pricing and ordering decisions for a decentralized distribution system. This study formulates four profit-maximization models and conducts equilibrium analysis for the two-echelon system with one wholesaler and multiple retailers under various policies, such as the individual replenishment, coordinated replenishment, VMI-only, and VMI coined with consignment contractual arrangements. Additionally, the geography of the efficient frontier is constructed to illustrate the feasible region of Pareto improvements from the channel-wide aspect. Our analysis reveals that the coordinated replenishment and VMI-only policies tend to set a higher retail price and, as a consequence, generate a lower profit. However, consistent bias can be rectified by a cooperative wholesaler under VMI with consignment arrangements, leading to increased channel-wide profit and efficiency.

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