Dynamic supply chain coordination under consignment and vendor-managed inventory in retailer-centric B2B electronic markets

• Published in: Industrial marketing management Vol. 42; no. 4; pp. 518 - 531
• Main Author: Chen, Liang-Tu
• Format: Journal Article
• Language: English
• Published: New York Elsevier Inc 01-05-2013; Elsevier Sequoia S.A
• Subjects: Channel coordination; Consignment; Consignment buying; Dynamic programming; Electronic markets; Game theory; Inventory; Inventory management; Management science; Market theory; Marketing; Profit maximization; Retail stores; Retail trade; Revenue sharing; Studies; Suppliers; Supply chain management; Supply chains; Vendor-managed inventory; Consignment; Channel coordination; Electronic markets; Game theory; Vendor-managed inventory
• ISSN: 0019-8501; 1873-2062
• DOI: 10.1016/j.indmarman.2013.03.004

This study examines the dynamic performance of vertically decentralized two-echelon channel coordination for deteriorating goods under consignment and vendor-managed inventory (VMI) contracts with revenue sharing from retailer-centric business-to-business transactions in both traditional markets and electronic markets (EMs). The research presents the profit-maximization problem and devises a method for making cross-enterprise dynamic joint decisions by combining calculus with dynamic programming for a retailer-led Stackelberg supply chain under cooperative and non-cooperative game settings over a multi-period planning horizon. The applicability of the proposed model is assessed using a case study involving a highly perishable product, sliced raw fish, in a supply chain comprising a regional seafood supplier and a local store belonging to a large national retail chain. The analytical results show that, in a cooperative setting, the EM with a consigned revenue-sharing VMI contract tends to achieve lower retail prices, larger stock quantity, improved channel efficiency, and increases in both retailer and supplier profits through an additional one-part tariff. Additionally, consumers benefit from lower retail prices and society benefits from increased overall channel profits in the cooperative channel and EM.
•This study examines the dynamic performance of vertically decentralized two-echelon channel coordination.•The research devises a method for making cross-enterprise joint decisions under cooperative and non-cooperative settings.•This study confirms a strong link between IT strategy, business processes, and supply chain performance.•Electronically-enabled profit-sharing cooperative supply chains can significantly increase channel performance and synergy.•Consumers benefit from lower prices and society benefits from increased channel profits in the cooperation and e-market.