An adjustable bi-level wholesale price contract for coordinating a supply chain under scenario-based stochastic demand

Seyyed Mahdi Hosseini-Motlagh, Kannan Govindan*, Mohammadreza Nematollahi, Abbas Jokar

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Resumé

Recently, significant research attention has been paid to supply chain (SC) coordination. However, previous studies assume that the market demand is deterministic or has a certain probability distribution. Taking a new approach, this paper analytically addresses the coordination of an SC under a scenario-based demand and proposes an adjustable bi-level wholesale price contract. To analyse the coordination problem under a scenario-based demand, we focus on corporate social responsibility (CSR) investment as an important decision in the SC context and consider a three-tier SC (one manufacturer, one distributor, and one retailer) where the retailer faces a scenario-based stochastic CSR-sensitive demand. Considering a manufacturer-Stackelberg game model, the manufacturer as a leader determines the amount of investment in the CSR issues and the retailer as a follower decides on the order quantity by considering possible demand scenarios. First, we propose the decentralized and centralized decision-making models using a scenario-based approach. Afterward, to resolve the channel conflict in each possible demand scenario, an adjustable bi-level wholesale contract is proposed to entice all SC actors to take part in the coordination scheme. Moreover, a profit-sharing plan is developed based on the Nash-bargaining model to fairly share the extra profits among SC actors. Finally, in order to analyse the efficacy of proposed models, a numerical example and a set of sensitivity analyses are carried out. The results indicate that the proposed contract not only coordinates the three-level SC under a scenario-based stochastic demand, but also improves the CSR level in comparison with the decentralized structure.

OriginalsprogEngelsk
TidsskriftInternational Journal of Production Economics
Vol/bind214
Sider (fra-til)175-195
ISSN0925-5273
DOI
StatusUdgivet - 1. aug. 2019

Fingeraftryk

Supply chains
Profitability
Probability distributions
Decision making

Citer dette

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abstract = "Recently, significant research attention has been paid to supply chain (SC) coordination. However, previous studies assume that the market demand is deterministic or has a certain probability distribution. Taking a new approach, this paper analytically addresses the coordination of an SC under a scenario-based demand and proposes an adjustable bi-level wholesale price contract. To analyse the coordination problem under a scenario-based demand, we focus on corporate social responsibility (CSR) investment as an important decision in the SC context and consider a three-tier SC (one manufacturer, one distributor, and one retailer) where the retailer faces a scenario-based stochastic CSR-sensitive demand. Considering a manufacturer-Stackelberg game model, the manufacturer as a leader determines the amount of investment in the CSR issues and the retailer as a follower decides on the order quantity by considering possible demand scenarios. First, we propose the decentralized and centralized decision-making models using a scenario-based approach. Afterward, to resolve the channel conflict in each possible demand scenario, an adjustable bi-level wholesale contract is proposed to entice all SC actors to take part in the coordination scheme. Moreover, a profit-sharing plan is developed based on the Nash-bargaining model to fairly share the extra profits among SC actors. Finally, in order to analyse the efficacy of proposed models, a numerical example and a set of sensitivity analyses are carried out. The results indicate that the proposed contract not only coordinates the three-level SC under a scenario-based stochastic demand, but also improves the CSR level in comparison with the decentralized structure.",
keywords = "Adjustable bi-level wholesale price contract, Channel coordination, Corporate social responsibility, Scenario-based stochastic demand, Three-echelon supply chain",
author = "Hosseini-Motlagh, {Seyyed Mahdi} and Kannan Govindan and Mohammadreza Nematollahi and Abbas Jokar",
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An adjustable bi-level wholesale price contract for coordinating a supply chain under scenario-based stochastic demand. / Hosseini-Motlagh, Seyyed Mahdi; Govindan, Kannan; Nematollahi, Mohammadreza; Jokar, Abbas.

I: International Journal of Production Economics, Bind 214, 01.08.2019, s. 175-195.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

TY - JOUR

T1 - An adjustable bi-level wholesale price contract for coordinating a supply chain under scenario-based stochastic demand

AU - Hosseini-Motlagh, Seyyed Mahdi

AU - Govindan, Kannan

AU - Nematollahi, Mohammadreza

AU - Jokar, Abbas

PY - 2019/8/1

Y1 - 2019/8/1

N2 - Recently, significant research attention has been paid to supply chain (SC) coordination. However, previous studies assume that the market demand is deterministic or has a certain probability distribution. Taking a new approach, this paper analytically addresses the coordination of an SC under a scenario-based demand and proposes an adjustable bi-level wholesale price contract. To analyse the coordination problem under a scenario-based demand, we focus on corporate social responsibility (CSR) investment as an important decision in the SC context and consider a three-tier SC (one manufacturer, one distributor, and one retailer) where the retailer faces a scenario-based stochastic CSR-sensitive demand. Considering a manufacturer-Stackelberg game model, the manufacturer as a leader determines the amount of investment in the CSR issues and the retailer as a follower decides on the order quantity by considering possible demand scenarios. First, we propose the decentralized and centralized decision-making models using a scenario-based approach. Afterward, to resolve the channel conflict in each possible demand scenario, an adjustable bi-level wholesale contract is proposed to entice all SC actors to take part in the coordination scheme. Moreover, a profit-sharing plan is developed based on the Nash-bargaining model to fairly share the extra profits among SC actors. Finally, in order to analyse the efficacy of proposed models, a numerical example and a set of sensitivity analyses are carried out. The results indicate that the proposed contract not only coordinates the three-level SC under a scenario-based stochastic demand, but also improves the CSR level in comparison with the decentralized structure.

AB - Recently, significant research attention has been paid to supply chain (SC) coordination. However, previous studies assume that the market demand is deterministic or has a certain probability distribution. Taking a new approach, this paper analytically addresses the coordination of an SC under a scenario-based demand and proposes an adjustable bi-level wholesale price contract. To analyse the coordination problem under a scenario-based demand, we focus on corporate social responsibility (CSR) investment as an important decision in the SC context and consider a three-tier SC (one manufacturer, one distributor, and one retailer) where the retailer faces a scenario-based stochastic CSR-sensitive demand. Considering a manufacturer-Stackelberg game model, the manufacturer as a leader determines the amount of investment in the CSR issues and the retailer as a follower decides on the order quantity by considering possible demand scenarios. First, we propose the decentralized and centralized decision-making models using a scenario-based approach. Afterward, to resolve the channel conflict in each possible demand scenario, an adjustable bi-level wholesale contract is proposed to entice all SC actors to take part in the coordination scheme. Moreover, a profit-sharing plan is developed based on the Nash-bargaining model to fairly share the extra profits among SC actors. Finally, in order to analyse the efficacy of proposed models, a numerical example and a set of sensitivity analyses are carried out. The results indicate that the proposed contract not only coordinates the three-level SC under a scenario-based stochastic demand, but also improves the CSR level in comparison with the decentralized structure.

KW - Adjustable bi-level wholesale price contract

KW - Channel coordination

KW - Corporate social responsibility

KW - Scenario-based stochastic demand

KW - Three-echelon supply chain

U2 - 10.1016/j.ijpe.2019.03.003

DO - 10.1016/j.ijpe.2019.03.003

M3 - Journal article

VL - 214

SP - 175

EP - 195

JO - International Journal of Production Economics

JF - International Journal of Production Economics

SN - 0925-5273

ER -