Please use this identifier to cite or link to this item:
Title: The effects of reducing demand uncertainty in a manufacturer-retailer channel for single-period products
Authors: Lau, HLA
Lau, HS
Keywords: Supply chain
Two-echelon newsboy problem
Issue Date: 2002
Publisher: Pergamon Press
Source: Computers and operations research, 2002, v. 29, no. 11, p. 1583-1602 How to cite?
Journal: Computers and operations research 
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.
ISSN: 0305-0548
EISSN: 1873-765X
DOI: 10.1016/S0305-0548(01)00047-8
Appears in Collections:Journal/Magazine Article

View full-text via PolyU eLinks SFX Query
Show full item record


Last Week
Last month
Citations as of Nov 6, 2018

Page view(s)

Last Week
Last month
Citations as of Nov 11, 2018

Google ScholarTM



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.