Demand For Two-retailer Supply Chain Coordination Based On The Shelf Inventory Levels

This paper investigates the supply chain coordination by a manufacturer with equal wholesle price plus different inventory subsidy contract (w,t_i), who sells singleproduct to retail market facing shelf-inventory-dependent-demand.Considering the following systems: Supply chain with single retailer is referred to as GS(1-1) system when it is centralized and as DS(1-1) system when it isdecentralized, respectively. Supply chain with two retailers is referred to as CS system when it is centralized; else, it is referred to as CR system when two retailers cooperate or as DS system when two retailers compete for market share.Addressing these questions: optimization problems in systems mentioned above; whether the supplier can coordinate CS(1-1) system with contract (w,t) when shelf inventory Elasticity is 0 <β≤1; whether the supplier can coordinate CR or DS system with contract (w,t₁) & (w,t₂) on the premise of constant returns to scale (β= 1) or decreased returns to scale (0 <β< 1); the difference of total profit of the two retailers between in CR system and in DS system whenβ= 1.The optimal solution of each issue is obtained except in DS (0 <β< 1) system. The paper demonstrates the supplier can achieve not only perfect coordination but anydesired allocation of the channel profit between himself and the retailers with the designed contract (w,t_i). Whenβ= 1, it is showed that competition between retailersgenerates inefficiency at the ratail market.The main traits and innovations of this paper are as following:(1) Research Model: Applying market share attraction model to describe demand dependent on shelf inventory, the existent model is improved and actual situation is better described from two dimensions of shelf inventory scale coefficient andelasticity.(2) Reserch Method: Whenβ= 1, the paper combines the research conclusion of single-retailer system to solve the two-retailer system; when 0 <β< 1, the paper findsthe single Nash Solution by coordinating the supply chain.(3) Coordination in CR (β= 1) , CR (0 <β< 1) and DS (0 <β< 1) systems indicated that contract (w, t_i) has the advantage of extensive applicability.