Limited quantity flexibility in a decentralized supply chain

Karakaya, Selçuk
In this study, we analyze a decentralized supply chain with a single retailer and a single manufacturer where the retailer sells two products in a single period. The products offered by the retailer consist of families of closely related products, which differ from each other in terms of a limited number of features only. The retailer places initial orders based on preliminary demand forecasts at the beginning of the period and has an opportunity to modify his initial order after receiving perfect demand information. However, the final orders of the retailer are constrained by his initial orders. Furthermore, the manufacturer is obligated to fill the retailer’s final order for each product. The manufacturer has two options for procurement. The first procurement option is regular delivery at the beginning of the period, after the initial orders of the retailer. The next one is expedited delivery, after the updated orders of the retailer are received. The expedited delivery is more expensive than regular. In this setting, our objective is to present an analytical model for this contract and characterize the optimal policies for the retailer and the manufacturer. We analyze three different levels of order adjustment flexibility settings: (i) no order adjustment, (ii) unlimited order adjustment and (iii) limited order adjustment.


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Citation Formats
S. Karakaya, “Limited quantity flexibility in a decentralized supply chain,” M.S. - Master of Science, Middle East Technical University, 2010.