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Article: The effects of reducing demand uncertainty in a manufacturer-retailer channel for single-period products
Title | The effects of reducing demand uncertainty in a manufacturer-retailer channel for single-period products |
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Authors | |
Keywords | Supply Chain Two-Echelon Newsboy Problem |
Issue Date | 2002 |
Publisher | Pergamon. The Journal's web site is located at http://www.elsevier.com/locate/cor |
Citation | Computers And Operations Research, 2002, v. 29 n. 11, p. 1583-1602 How to Cite? |
Abstract | The retail-market demand for a newsboy-type product is uncertain. The product's manufacturer sets: (i) a wholesale price "w/unit" for selling the product to the retailer, and (ii) the refund amount "r/unit" (if any) for unsold units returned by the retailer. Given w and r, the retailer determines: (i) the quantity Q that he orders from the manufacturer, and (ii) the retailer price "p/unit" at which he sells to the consumers. Keeping in mind the retailer's freedom to set Q and p in the retailer's own interest, the manufacturer needs to determine how to set w and r that are optimal for the manufacturer. For this market structure, this paper studies how the level of retail-market demand uncertainty will affect the decisions (w, r, Q, p), the expected manufacturer's profit and the expected retailer's profit. Many of the effects turn out to be counter-intuitive with interesting explanations. This paper extends a problem considered (in different variations) in several recent papers in major IE/MS/OR, marketing and economics journals. Somewhat counter-intuitive (and contradictory) results are presented here. Single-period of "newsboy-type" products have been the subject of many recent studies. Practically all these studies assume that there is only one decision-maker; i.e., the vertically integrated "manufacturer-cum-retailer". As an entirely separate issue, the interactions between a manufacturer and a retailer in a "market channel" have also been widely studied, but mostly in the context of amulti-period product. Both characteristics ("single-period product" and "market channel") were included in Iyer and Bergen's (Management Science [4]) investigation of a manufacturer-retailer channel for fashion goods. Iyer and Bergen considered the effects of demand-uncertainty reduction; they made the following assumptions: I. the manufacturer cannot change the wholesale price; II. the manufacturer does not accept returns from the retailer; and III. the retail price is fixed. With Iyer and Bergen's assumptions I-III relaxed, Emmons and Gilbert (Management Science [8]) considered manufacturer-retailer interactions for newsboy products. However, their results do not relate to how demand-uncertainty reduction would affect the manufacturer-retailer interactions (i.e., Iyer and Bergen's question). Our paper shows that when one or more of Iyer and Bergen's three assumptions are relaxed, the effects of demand-uncertainty reduction are significantly different from those depicted in Iyer and Bergen's paper. © 2002 Elsevier Science Ltd. All rights reserved. |
Persistent Identifier | http://hdl.handle.net/10722/177900 |
ISSN | 2023 Impact Factor: 4.1 2023 SCImago Journal Rankings: 1.574 |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Hing Ling Lau, A | en_US |
dc.contributor.author | Lau, HS | en_US |
dc.date.accessioned | 2012-12-19T09:40:45Z | - |
dc.date.available | 2012-12-19T09:40:45Z | - |
dc.date.issued | 2002 | en_US |
dc.identifier.citation | Computers And Operations Research, 2002, v. 29 n. 11, p. 1583-1602 | en_US |
dc.identifier.issn | 0305-0548 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177900 | - |
dc.description.abstract | The retail-market demand for a newsboy-type product is uncertain. The product's manufacturer sets: (i) a wholesale price "w/unit" for selling the product to the retailer, and (ii) the refund amount "r/unit" (if any) for unsold units returned by the retailer. Given w and r, the retailer determines: (i) the quantity Q that he orders from the manufacturer, and (ii) the retailer price "p/unit" at which he sells to the consumers. Keeping in mind the retailer's freedom to set Q and p in the retailer's own interest, the manufacturer needs to determine how to set w and r that are optimal for the manufacturer. For this market structure, this paper studies how the level of retail-market demand uncertainty will affect the decisions (w, r, Q, p), the expected manufacturer's profit and the expected retailer's profit. Many of the effects turn out to be counter-intuitive with interesting explanations. This paper extends a problem considered (in different variations) in several recent papers in major IE/MS/OR, marketing and economics journals. Somewhat counter-intuitive (and contradictory) results are presented here. Single-period of "newsboy-type" products have been the subject of many recent studies. Practically all these studies assume that there is only one decision-maker; i.e., the vertically integrated "manufacturer-cum-retailer". As an entirely separate issue, the interactions between a manufacturer and a retailer in a "market channel" have also been widely studied, but mostly in the context of amulti-period product. Both characteristics ("single-period product" and "market channel") were included in Iyer and Bergen's (Management Science [4]) investigation of a manufacturer-retailer channel for fashion goods. Iyer and Bergen considered the effects of demand-uncertainty reduction; they made the following assumptions: I. the manufacturer cannot change the wholesale price; II. the manufacturer does not accept returns from the retailer; and III. the retail price is fixed. With Iyer and Bergen's assumptions I-III relaxed, Emmons and Gilbert (Management Science [8]) considered manufacturer-retailer interactions for newsboy products. However, their results do not relate to how demand-uncertainty reduction would affect the manufacturer-retailer interactions (i.e., Iyer and Bergen's question). Our paper shows that when one or more of Iyer and Bergen's three assumptions are relaxed, the effects of demand-uncertainty reduction are significantly different from those depicted in Iyer and Bergen's paper. © 2002 Elsevier Science Ltd. All rights reserved. | en_US |
dc.language | eng | en_US |
dc.publisher | Pergamon. The Journal's web site is located at http://www.elsevier.com/locate/cor | en_US |
dc.relation.ispartof | Computers and Operations Research | en_US |
dc.subject | Supply Chain | en_US |
dc.subject | Two-Echelon Newsboy Problem | en_US |
dc.title | The effects of reducing demand uncertainty in a manufacturer-retailer channel for single-period products | en_US |
dc.type | Article | en_US |
dc.identifier.email | Hing Ling Lau, A: ahlau@business.hku.hk | en_US |
dc.identifier.authority | Hing Ling Lau, A=rp01072 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1016/S0305-0548(01)00047-8 | en_US |
dc.identifier.scopus | eid_2-s2.0-0036722296 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-0036722296&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 29 | en_US |
dc.identifier.issue | 11 | en_US |
dc.identifier.spage | 1583 | en_US |
dc.identifier.epage | 1602 | en_US |
dc.publisher.place | United Kingdom | en_US |
dc.identifier.scopusauthorid | Hing Ling Lau, A=7202626080 | en_US |
dc.identifier.scopusauthorid | Lau, HS=7201497264 | en_US |
dc.identifier.issnl | 0305-0548 | - |