Studying A Multi-level Supply Chain With Quantity Discounts

As the most effective management model to cope with the intensive competition, supply chain management requires cooperation between channel members and integrates the value chain, but decentralized decision making always damages the whole channel profit inevitably when all channel members try to maximize their own profits, this is called"double marginalization". Supply chain contract is an effective tool to avoid or reduce the damage of the value channel. Among these contracts quantity discount can afford some kinds of stimulations to encourage channel members make central decisions to coordinate their behaviors. Even a supply chain contract can not lead to the perfect coordination maybe it can get a Pareto solution.Quantity discount is a favorable price police afforded by sellers, when buyers increase their ordering sizes sellers always decrease their unit price. In supply chain management it is used as an important coordinate contract to promote the corporation of all channel members, lower the system transaction cost, increase profits, reduce market risk, improve costumers'satisfactions and realize the"double-win"between channel members.This paper fully analyzes the concept and significance of quantity discount and proposes the new system framework of research of quantity discount in supply chain management. It utilizes some methods, such as contract theory ,principal agent theory to extend the research of quantity discount and further study information conditions (perfect information condition and asymmetric information condition), demand assumptions (certainty demand and stochastic demand) by means of quantity discount contract. Based on the coordination of the second level supply chain,this paper studies the coordination issue of a three level supply chain that consists of one supplier ,one manufacturer and one retailer selling short life cycle products in a single period model,that is,supplier, manufacturer, retailer in order to maximize profits for the purpose of the collaboration optimal ordering problem in the random demand. The demand information is asymmetric, the retailer knows all information. They are faced with four strategies when collaboration, given four profit model in the four strategies and retailers'optimal order quantity in these four strategies and compared their size Finally the example of the demand under the normal distribution tests the supply chain's largest profit that the three full cooperation of supplier-manufacturer-retailer .