Coordination strategies for products with a short life cycle in a capacitated channel

Binling Lu, Purdue University

Abstract

One of the main factors that contribute to the difficulties in managing a supply chain is high demand uncertainty. This presents a challenge especially when products of interest have short life cycles. In such environments and assuming that an accurate demand estimate can be obtained, it has been shown that a delay in making an order commitment benefits both the manufacturer and the retailer. In this study, a retailer uses an information gathering process for updating demand estimates in a Bayesian framework, and estimation accuracy improves as more information is continuously accumulated. We also consider a manufacturer having a finite regular capacity with the availability of a fixed overtime capacity. As part of the study, we develop the properties of an optimal production allocation between regular and overtime capacity. Furthermore, we propose production lead time dependent quantity discount pricing arrangements between the manufacturer and the retailer that allows both of them to take advantage of more accurate demand estimates and accounts for the availability of overtime capacity. We also construct a target rebate and returns contract that achieves win-win coordination in such an integrated system of information and production flexibility.

Degree

Ph.D.

Advisors

Plante, Purdue University.

Subject Area

Management

COinS