Research Of The Optimal Early Order Commitment Policy In Supply Chain Management

Supply chain coordination is an important field in supply chain management research, and its core purpose is to collaborate the upstream and downstream enterprises in a supply chain to reduce the overall operating costs. As a strategy for supply chain coordination, early order commitment (EOC) policy refers to the following circumstance: when the retailer in a supply chain (downstream enterprise) orders from the supplier (upstream enterprise), it intentionally places an early order so that the required periods between the ordering and receipt of goods are longer than the normal periods needed to cover the manufacturer's transportation time without an early order. In this paper, we focus on the multi-retailer supply chain, and analyze the optimal EOC strategy for the retailers under centralized decision. We begin our research with two-level supply chains, and extend to the three-level and m-level supply chain situations later.In a single-supplier, multiple-retailer, two-level supply chain, when retailers face a first-order autoregressive demand (AR (1)), under the centralized decision-making situation, we analyze the relationship between the total supply chain costs and the retailers'orders in advance, which could be transformed to a 0-1 programming problem. Furthermore, after analyzing the feature of the 0-1 programming's optimal solution, this paper designs a polynomial time algorithm to this problem. In addition, this article also analyzes the impacts on each firm in the supply chain if the supplier adopts the wholesale discount contract in a decentralized scenario, and gives a sufficient condition, under which the wholesale discount contract can induce the whole supply chain to achieve system coordination.In a multi-retailer, more-than-two-level supply chain, when the retailers face a stable demand, this paper builds a model which aims to analyze the relationship between the total supply chain cost and the retailers'orders in advance. Then, we transform the original problem into a 0-1 programming problem, whose feature could help to design a polynomial time algorithm with m being a constant. This paper also extends the model under the steady demand case to the case of AR(1) demand, and demonstrates that the algorithm designed for the steady demand case can also be applicable to the AR (1) case, if the supply chain satisfies some conditions.The major contribution of this paper is to build mathematical models for multi-level supply chains when retailers practice EOC policy under centralized decision. The problems of finding the optimal EOC periods for the retailers are transformed to 0-1 programing problems. After analizing the feature of the problems, polynomial algorithms are given to obtain the optimal solutions.