The Strategic Inventory Management In Supply Chains

The conventional wisdom holds that inventory is held for many reasons,such as upstream manufacturers’ economies of scale in procurement or production,production delays,safety stocks to cope with demand or supply uncertainty.However,inventory is held by the retailer may also be strategically,that is,in the future negotiations with the manufacturer to obtain higher bargaining power and forcing the manufacturer to lower the wholesale price,such inventory is also called "Strategic inventory".It is now widely accepted that strategic inventory can mitigate double marginalization effects and improve the efficiency of the supply chain.At present,as competition in the market is increasingly severe,exploring how to effectively use strategic inventory strategies has an important impact for the firms to improve market competitiveness.This dissertation focuses on the strategic inventory problem in supply chain management,and studies the strategic inventory decision of retailers from three different perspectives: reference price effect,production learning effect and cost reduction.we discusses the effectiveness of strategic inventory to supply chain members and supply chain efficiency.The main contents of the dissertation are as follows:Firstly,I explores the strategic inventory strategy under the influence of the reference price effect and studies the impact of strategic inventory on supply chain efficiency.To this end,considering a two-layer supply chain which consisting of one manufacturer and one retailer.In the secondly period,the utility of the consumer when purchasing the product is affected by the price in the first period.I also considers both price commitment contract and dynamic pricing contract.The results indicate that the price commitment contract can completely eliminate the retailer’s strategic inventory;for the dynamic contracts,when the holding cost is low,the retailer will strategically hold the inventory,the reference price effect will inhibit the retailer’s strategic inventory behavior;compare the profit of the supply chain members under the two contracts,the strategic inventory always bring more profits to the manufacturer.when the reference price effect is more significant,strategic inventory can realize the supply chain members’ Tired to improve and improve channel efficiency.Finally,I also analyzes the situation when the holding cost is variable and related to product value.The results show that regardless of whether the retailer holds inventory,the profit of supply chain members under dynamic pricing contract is higher than that under price commitment contract.Secondly,I consider a two period model of a supply chain,which consist of one manufacturer and one retailer.Due to the production learning effect,the manufacturer’s second-period production cost declines linearly in the first-period production.The strategic inventory withholding by the retailer was researched separately under the dynamic pricing contracts and the price commitment contracts.The results show that under the dynamic contract,the retailer holds strategic inventory in equilibrium only when inventory holding costs is low.when the production learning effect becomes more significant,it will encourage the retailer to hold more inventories.The price commitment contract can completely eliminate the strategic inventory.The manufacturer will always prefer dynamic pricing contracts.The retailer’s preference for the contract depends both on production learning effect and holding cost.On the other hand,when the production learning effect is significant,the supply chain is more efficient under dynamic pricing contracts.On this basis,I analyze strategic inventory when the manufacturer lack of observability of the retailer’s inventory or technology advancement effect is exist.and discuss the impact of strategic inventory on the efficiency of supply chain members.The results show that when the technology advancement effect is at a medium level,strategic inventory hurts the supply chain by making the double marginalization effect more significant.Finally,When the manufacturer exerts effort to reduce her unit production cost,a twostage model is established to investigate the strategic inventory.Based on two cost reduction planning strategies that are common in practice: fixed cost reduction and dynamic cost reduction.For each cost reduction planning of the manufacturer,the optimal cost reduction level,strategic inventory and pricing decisions of retailers are analyzed under the dynamic pricing contracts and the price commitment contracts.The impact of cost reduction efficiency and inventory holding costs on optimal decisions are examined.The results show that if the cost reduction planning only make in the first period,cost reduction planning will stimulate strategic inventory.Especially when the manufacturer is efficient in cost reduction,strategic inventory always benefits the retailer and the supply chain,which can weaken double marginalization and improve channel efficiency.When the manufacturer dynamically invest to reduce production cost in each period,production cost reduction can inhibit strategic inventory,especially when the manufacturer is sufficiently efficient in cost reduction,the dynamic pricing contracts can completely eliminate strategic inventory.Strategic inventory will reduce the overall cost reduction levels and may makes the double marginalization stronger,which hurts the retailer,manufacturers and the supply chain.