A Study On Transfer Pricing And The Optimaization Model Based On Supply Chain Coordination

This research investigates systematically the problem about supply chain transfer pricing and optimum based on supply chain coordination under traditional price-sensitivity demand and modern time-sensitivity demand from the following four aspects, that is, coordinating 1:N supply chain economic order quantities (EOQ), feasible transfer pricing mechanism for different inventory ownerships, transfer pricing flexibility to stimulate channel members'innovation investment to improve operation efficiency, and the analysis and compare of supply chain coordinating inventory based on different transfer pricing models. This research investigates deeply the decision methodology of transfer pricing based on supply chain coordination management under price and time-contingent demand, analyzes and resolves the primary problems in decision models, and obtains the corresponding transfer pricing strategies of supply chain coordination. The main content includes:(1) Transfer pricing in a 1:N supply chain based on RVOQ and IVOQ assumptions.By putting the opportunity cost that exists in ordering and inventory process into decision model and explore the lot size coordination between supplier and retailers, we conduct a comparative study on transfer pricing and its influences on channel performance based on RVOQ and IVOQ assumptions. And also, we perform a regression analysis for the transfer prices and some potential factors to explore the main factors that affect transfer pricing. The results show that, price markup transfer pricing mechanism is an effective tool to bring for reference for 1:N supply chain lot size coordination. Owning to integer constraint on lot size and order times, the transfer prices that we put into effect in reality are not the global optimum solutions.(2) Transfer pricing and the optimum model based on three forms of inventory ownership.Beginning with three forms of inventory ownerships (ROI, WOI-d, WOI-c) suggested by Boyaci and Gallego, we first investigate the decision process for ROI and WOI-d assumptions by using the method of traditional EHCA analysis, and explore the feasibility of price markup pricing method when it is applied for the ROI and WOI-d inventory ownerships, and precisely analyze the related constraints and the countermeasures. And then, considering the character of WOI-c mode and applying profit sharing mechanism, we focus on appropriate revenue-fraction and the accordingly transfer pricing strategy, and adopt sequential optimization algorithm suggested by Roundy during the actual operational process. With analyzing and comparison, we can conclude that, first, the relatively magnitude of the supplier and the retailers'annual capital opportunity cost may result in different optimum lot size under different inventory ownerships. Second, owning to the relatively magnitude of the supplier and the retailers'annual opportunity cost and/or setup cost, transfer price based on ROI and WOI-d modes may be too small or negative, and the price markup-based transfer pricing is infeasible under certain circumstance. With respect to the WOI-c mode, the sequential optimization algorithm is more appreciated by large-scale demand.(3) Strategic transfer pricing flexibility to stimulate MTO supply chain innovation investment.With incorporating delivery time into traditionally used price-elasticity demand curve, we examine the interaction between strategic transfer pricing flexibility and downstream innovation, and the relatively optimal quoted delivery time, transfer pricing, and the partners'behavior selection for the channel operates in a make-to-order fashion. We use this analysis to show that the interaction between full commitment and full flexibility has nothing to do with the optimal quoted delivery time, while full commitment is dominating full flexibility in promoting downstream innovation investment, together with improving the channel and the channel members'expected profits.(4) Transfer pricing and the optimum model based on MTO supply chain inventory coordination.With defining supply chain firms' estimation probability distribution of delivery time based on buffer size and customers'delivery time-contingent demand, we construct price markup-based and the Stackelberg-based transfer pricing models, and provide a new insight into applying transfer pricing mechanism to stimulate supply chain buffer size coordination. We use this analysis to show that the deviation of quoted delivery time, the lateness penalty and the out-of-stock cost may influence the appropriate transfer pricing and the supplier's optimal buffer size setting. While, with exercising two-part profit sharing mechanism, the manufacturer can entice the rational behavior of the supplier in a direction that best serves the manufacturer's interests and/or achieves supply chain coordination.