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Joint pricing and inventory strategies in a supply chain subject to inventory inaccuracy

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posted on 2019-02-20, 14:11 authored by Feng Tao, Tijun Fan, Yao-Yu Wang, Kin Keung Lai

This paper focuses on pricing strategies, inventory policies for a supply chain when Radio Frequency Identification (RFID) technology is adopted to cope with inventory inaccuracy. The supply chain consists of one supplier and one retailer, in which the RFID tag price is shared between the supplier and the retailer. We present and compare the performance differences between a wholesale price contract and a consignment contract when the retailer is the Stackelberg leader and the supplier is the follower. Based on the optimal pricing and inventory decisions, an interesting observation of contract selection is that there are two critical values of inventory available rate such that when the inventory availability is less than the lower value, both the supplier and the retailer prefer a consignment contract; when the inventory availability is greater than the upper value, a wholesale price contract is their best choice; when the inventory availability is between the two values, the supplier prefers a wholesale price contract and the retailer prefers a consignment contract. Additionally, there exist threshold values of RFID tag price and sharing rate to determine the contract preference for the retailer. Furthermore, the profits of both the supplier and the retailer are independent of the RFID tag price sharing rate in a wholesale price contract, and the supplier has the incentive to invest in RFID tag cost in a consignment contract.

Funding

The work described in this paper was supported by the National Natural Science Foundation of China [grant numbers 71872064, 71671119, 71431004, 71772063, and 71471125]; in part by the Shanghai Pujiang Program [grant number 18PJC025]; in part by the Natural Science Foundation of Shanghai [grant number 18ZR1409400]; in part by the Ministry of Education Humanities and Social Science Research Planning Fund Project of China [grant number 18YJAZH046]; in part by the Philosophy and Social Science Research Grand of Jiangsu Province [grant number 2016SJB630108]; in part by the China Postdoctoral Science Foundation [grant numbers 2016 |T90500, 2015 |M580469, 2011M500745], and the Jiangsu Postdoctoral Science Research Foundation [grant number 1601249C].

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    International Journal of Production Research

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