Prague Economic Papers 2014, 23(2):198-216 | DOI: 10.18267/j.pep.480

Analysis of Production - Inventory Decisions in a Decentralized Supply Chain

Saeed Alaei¹, Masoud Behravesh², Nayere Karegar²

¹ Department of Industrial Engineering, K. N. Toosi University of Technology, Tehran, Iran.

² Young Researchers and Elite Club, Marand Branch, Islamic Azad University, Marand, Iran (behrawesh@yahoo.com).

Many contracts, such as buy-back policy, cost- and revenue- sharing policies, are widely applied in the literature for supply chain coordination problem. However, the additional gain from coordination may not necessarily cover the extra administrative costs incurred by applying these contracts. In this paper, a production inventory problem is considered in a two-level supply chain. The problem is formulated as a Stackelberg game. Then, the retail fixed mark-up (RFM) policy is examined in order to investigate its performance on supply chain. We apply this policy because of its lower administrative costs compared to other policies. We found that RFM policy is not capable of coordinating the channel; however, it leads to considerable improvements over the channel. For example, it is shown that it improves each member's profit and leads to Pareto improvement over Stackelberg policy. Besides, its average efficiency is about 96% of that of integrated policy approach.

Klíčová slova: decentralized decision making, retail fixed mark-up (RFM), pricing decisions, supply chain coordination

JEL classification: C44, P11, R32

Zveřejněno: 1. leden 2014  Zobrazit citaci