1. Two-level promotion and ordering policy in a supply chain
- Author
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Lu-Wen Liao, Hui-Ling Fan, Thuy-Linh Vu, Pei-Ling Lee, and Yu-Chung Tsao
- Subjects
021103 operations research ,Supply chain management ,Supply chain ,05 social sciences ,0211 other engineering and technologies ,02 engineering and technology ,Management Science and Operations Research ,Profit (economics) ,Computer Science Applications ,Theoretical Computer Science ,Sales promotion ,0502 economics and business ,Business ,Trade promotion ,050203 business & management ,Industrial organization - Abstract
This research develops two models to consider retailer sales promotion and manufacturer trade promotion under demand uncertainty. The objective of the first model is to determine the retailer’s optimal promotional effort and order quantity while maximizing the retailer’s profit under exogenous trade promotion. The second model extends the first to consider the manufacturer’s endogenous trade promotion decisions. For these models, three different trade promotion policies (off-invoice, scan-back, unsold-discount) have been compared to identify the policy that can increase the manufacturer’s and the retailer’s profits. For the model with exogenous trade promotion, the retailer’s promotional effort level, order quantity, and profit are highest under the off-invoice trade promotion policy. With respect to the manufacturer’s endogenous trade promotion decisions, the retailer’s promotional effort level, order quantity, and profit, and the manufacturer’s profit are higher under the off-invoice policy than under the scan-backs policy. When comparing the three different trade promotion policies, we also find that the wholesale price is a key factor that influences a manufacturer’s profit. Our research sheds light on the importance of trade promotion policy in supply chain management.
- Published
- 2021
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