Timing Of Order Placement For Retailers Under Competition And Demand Uncertainty

High demand uncertainty poses huge challenges for companies in their ability to quickly respond to the market preferences while also maintaining adequate levels of inventory.In this thesis we consider a supply chain system consisting of one common supplier and two competing retailers.Faced with stochastic market demand,retailers place orders with the supplier under a wholesale price contract and sell differentiated but substitutable products by charging competitive prices during a single selling horizon.We develop a multi-stage game to model the situation.In the initial stage,retailers can choose to place their order before selling horizon,or alternatively order after demand realization.Then in the first stage,the supplier determines wholesale price and retailers determine their selling prices simultaneously.Retailer who orders early will also need to determine order quantity.Next,in the second stage,demand uncertainty is realized and retailer who postpones his order will determine order quantity.Finally,transactions happen and all players collect profits.By analyzing this multi-stage game,we derive the optimal decisions of each member.It is found that when the demand uncertainty is sufficiently high or low,retailers will adopt the symmetric procurement strategy;otherwise,the asymmetric equilibrium will occur and retailers will adopt different ordering strategies.Then we assume that the supplier can decide whether to introduce the late-ordering option.We find that only if production cost is high,introducing late-ordering option can benefit the supplier.Finally,we study three extension cases: leading time is positive,the wholesale price is related to the timing of order and the supplier determines the wholesale price before the timing decisions of retailers.And we find our main insights still hold.