The Research Of Supply Chain Coordination With A Leading Supplier In The Tobacco Industry

With the modern market integration and internationalcompetition, business has increasingly presented a trend of globalization. So for businesses, the application of supply chain managenment is the key for the businesses,success. Economic development as well as academic and theoretical circles make the supply chain management be hot in business management research. The modern market competition is becoming the competition about the supply chain, with the the depth of the supply chain. We have a good understanding of "Double Marginalization Effect"and "Bullwhip Effect" in the supply chain. Therefore, how to avoid the inherent defects of the supply chain and how to coordination the participants to get the best are the new directions in the research of the supply chain.The phenomenon of all participants in the supply chain to maximize their own interests and interdependence of each other makes the supply chain coordination become the focus of supply chain management. As the differences of the industry itself and the degree of the interdependence and relative position of participants in the supply chain, the supply chain also has a complex feature. This dissertation is based on Principal-Agent Theory and Game Theory and others, using of the Staekelberg Game model about the price contract, in order to make the entire supply chain get the optimal revenue.The tobacco industry has a significant standing in China. It is not only the largest tobacco producer and the largest consumer, but also is an important source of tax revenue in China. Because of this, the government gives more control to the tobacco industry, the tobacco industry obeys the Monopolization Management System. The Monopolization Management System determines the monopoly of the tobacco industry, and the tobacco production enterprises and the tobacco sale companises have a stronger position to the distribution merchants in the tobacco industry supply chain. So the tobacco industry supply chain coordination is the typical supplier-leading two-stage supply chain game. The coordination between tobacco companines and retailers in the tobacco industry supply chain can use the Staekelberg Game model about the price contract, to find the optimal solution for the supply chain and the participants.Since the implementation of the Monopolization Management System in China's tobacco industry, that is, the government plans and manages the production and sales of cigarettes, in particular the sale of all cigarettes are controled through concentration distribution by tobacco companies from all over, while the cigarette manufacturer shall not sale their products directly. So the cigarette sales has its unique characteristics in the tobacco industry, that the tobacco companies need to establish their own distribution network. Due to the establishing of the tobacco companies based on the geographical division, the distribution network also has the same geographical feature. It basically covers all local retailers households, such as chain supermarkets, shops and other retail outlets. In accordance with the cigarette brands and the demand functions, the retailers have two typical types. One is the larger supermarket type retail stores who sell high-priced cigarettes, the other is the convenience store type retailers who sell low-priced cigarettes.According to the retail outlets selling different brands of cigarettes and the different orders of the cigarette demand function, the two-stage supply chain game models leaded by the tobacco companies in the tobacco industry supply chain also have their own features.1. When the retail outlets are the larger supermarket type retail stores who sell the relatively high price of cigarette products, and the demand function of the order is the multiplicative demand function, so set up the two-stage supply chain game model between the tobacco companies and the larger supermarket type retail stores. According to the model analysis, we get the following conclusions: When demand follows the multiplicative form, there are optimumαwhich is the markup of the correlator between retail price and wholesale price, that optimizes the expected profits for the integrated supply chain, the supplier and the retailer. We analysis expected profits of the integrated supply chain underαm* ,α* ,αr* through data and diagrams. We find that the profirt function curve underαm* is much closer to the profirt function curve underα* than the profirt function curve under *αr. So we can illustrates that the tobacco industry supply chain performance can be improved by distributing the relative pricing power between the tobacco companies and the larger supermarket type retail stores choosing the retail markup through stategic negotination. In addition, tobacco companies should completely independently control of the retail markup to get the optimum expected profits for the integrated supply chain.2. When the retail outlets are the convenience store type retailers who sell the relatively low price of cigarette products, and the demand function of the order is the linear additive demand function. In this case, we set up the two-stage supply chain game model between the tobacco companies and the convenience store type retailers. According to the model analysis, we get the following conclusions: The optimum expected profits for the integrated supply chain, the tobacco companies and the convenience store type retailers depend on the level of demand uncertainly which is reflected by the random demand factorεin function. In the different circumstances, we also can get that the tobacco industry supply chain performance can be improved by distributing the relative pricing power between the tobacco companies and the convenience store type retailers choosing the retail markup through stategic negotination. If not, tobacco companies should completely independently control of the retail markup to get the optimum expected profits for the integrated supply chain.