Study On Decision Making Problems Of Product Reorder, New Product Production And Sales From Manufacturers’ Perspective

In order to meet the diverse demands of customers, manufacturers improveproduct update speed. On the one hand, it leads to shorter product life cycle. As theproduct life cycle gets shorter and shorter, manufacturers will reduce stocks to avoidexcessive inventory, which is listed as primal critical problem for product operationsmanagement and cost control. However, over-reduction of stocks usually leads tostockouts. When a stockout happens, customers will tend to buy other brands assubstitutes, which brings the manufacturers bigger losses than retailers. On the otherhand, when manufacturers continue to sell existing products as a supplement to newproducts, it will cause the phenomenon of coexistence of new and old products.Although the coexistence of both new and old products expands the coverage of theproducts in the market and strengthens the competetiveness of products, it has alsoincreased the difficulty for manufacturers in making decisions about production andsales. Under such background, from the perspective of a manufacturer, this dissertaionfirstly studies the reorder decision problem of a supply chain including onemanufacturer and one retailer with the purpose of dealing with stockouts, and thenstudies on the decision making problem with production and sales when new productsand old ones are coexistent.The greatest difference between analyzing these two decision problems from themanufacturer’s perspective and retailer’s perspective is as follows: on the one hand, itneeds to consider whether the manufacturer is capable of quick replenishment; on theother hand, if the manufacturer is capable of quick replenishment, when facing thedecision making problem of product reorder, it will bring a difference on the dealdecision between manufacturer and retailer, depending on whether the manufacturerhas previously committed retailer of reorder opportunity (with-commitment) or themanufacturer has not previously committed reorder (without-commitment). Based onthis difference, the main research work and results of this dissertation are as follows:(1) In the case when the manufacturer is unable to replenish quickly, optimalreorder decision rules for both manufacturer and retailer are obtained where the retailer will have to bear the customer maintenance costs. The expected profit increases theconditions for the manufacturer and correspondingly the retailer and Paretoimprovement conditions for the supply chain are analyzed. Besides, when the customermaintenance costs are high, an allocation scheme of the customer maintenance costs isdesigned to realize the Pareto improvement of the supply chain. The results show: Inthe reorder decision mode, retailers always have expected profit increase conditionswhile the expected profit increase conditions for manufacturers only exist whencustomer maintenance costs do not exceed a certain threshold value. However, onlythrough the allocation scheme of customer maintenance costs will the manufacturer bebetter off again. In addition, Pareto improvement of the supply chain is also achievedagain.(2) In the case when the manufacturer has the infinite ability to replenish quickly,two optimal reorder decision-making models for both manufacturer and retailer areestablished under with-commitment situation and without-commitment situation,respectively. The expected profit increase conditions for the manufacturer and theretailer and Pareto improvement conditions for the supply chain are analyzed. Finally,by means of comparing the maximum possible expected profit for the manufacturerunder with-commitment and without-commitment situation, the selected conditions forthe manufacturer between with-commitment and without-commitment are obtained.(3) In the case when the manufacturer has finite ability to replenish quickly, twooptimal reorder decision-making models for both manufacturer and retailer areestablished under with-commitment situation and without-commitment situationrespectively. Under without-commitment situation, the expected profit increaseconditions for the manufacturer and the retailer and Pareto improvement conditions forthe supply chain are analyzed. Under with-commitment situation, a coordinationmechanism with a revenue sharing contract is introduced for the supply chain. With thecoordination mechanism, Pareto improvement of the supply chain is achieved.(4) In the case when the new products and old ones are coexistent, by means ofestablishing the Stackelberg dynamic game model for deal decision making for themanufacturer and the retailer, a decision making problems of new and old productsproduction and sales is analyzed when the manufacturer has the infinite ability toreplenish quickly. The results show: Facing with value difference between new and old products, the manufacturer will only produce two kinds of products when theevaluation gain of new products for customers is less than the ratio of production costsof new and old products; when faced with uncertain demand of new products, themanufacturer won’t have his expected profit affected by choosing different sales time,because both manufacturer and retailer will always choose clearance price of productsno matter the manufacturer sells early or late, avoiding the loss of overstock caused bylow demand state; when considering the infinite ability to replenish quickly, themanufacturer will choose to sell late, which benefits both the manufacturer and theretailer.