Research On Supply Chain Coordination Mechanisms With Inventory-Level-Dependent Demand

Currently, the positive effect of displayed inventory on sales for many products has been widely acknowledged. However, the cost of capital stock occupancy brought by is giving a large impact on the retailers'shelf-space allocation arrangement which would also affect market demand, may deviate it away from being Pareto efficient. And thus, many manufacturers strive for market share through sharing some of the retailers'inventory cost. This essey is based on operational research, inventory control and supply chain management theory. In allusion to the phenomenon of manufacturers offering subsidies to share the retailers'inventory cost in exchange for more shelf space allocated, the motivation of the paper is to generalize and further study two-echelon supply chain coordination between the producter and retailer in diverse shelf-space-dependent demand environment. And in specific, the paper is composed of three decision making issues, one issue with deterministic shelf-level-dependent demand, another with shelf level and retail price dependent demand, and the other in random environment. The details are given as follows:1. Regarding the promotion effect for sale brought by displayed inventory, the essey summarizes academic achievements systematically regarding shelf-space-dependent demand and supply chain coordination.2. The study formes an 100 percent shelf-level-dependent demand within a centralized and a decentralized shpply chain. The optimal decisions of the decision makers, the supply chain and the retailer are respectively analysed with unique analytic solution separately. And then we deduce and certify that the retailer's optimal shelf level allocated to the goods in lower then the Pareto Optimality level which leads to operational inefficiency. And finally, we fulfill the efficiency through inventory subsidy coordination mechanism and obtain the applicative conditions which guarantee a win-win situation.3. Based on the output, we soften the terms, extend the demand as a function of inventory level and retail price assuming that both of the elements are in the control of the retailer, and further study the feasibility of pure subsidy coordination mechanism. Again, the result shows the unique efficient decision combination while proves the inventory level realized in decentralized system is lower than in centralized system while the retail price is higher than the Pareto Optimality level. We also prove the incapability of pure inventory cost subsidy which can only deal with the inventory decision. And through introducing combined contracts composed of revenue sharing and inventory subsidy arrangement, Pareto Optimality is again realized. In this case, it would be effective with certain paramenter combinations which would only influence the distribution of the total revenue of the supply chain. The impact of certain factors, (especially the capital return rate which affects the opportunity costs of holding the inventory) on the strategies, the profits and the contract are put forward and are given sensitivity analysis.4. The last part of the research switches to the stochastic case which is more close to the real market emphasizing retailers'order quantity as well as shelf space allocation decisions. Supposing he players risk neutral and the random factor meeting normal distribution hypothesis, and thus expectation profit maximization dominates the partners'exonomic decision making process. The research indicates that both optimal order quantity and shelf space are below the Pareto efficient level. We deepen the study step by step, comparing the uncoordinated occasion with dicentralized decision making process, partial coordinated case with subsidy mechanism and finally achieve the combined coordination mechanism composed by subsidy, partly revenue sharing and buy-back agreement. Corresponding numerical examples are given in order to better illustrate the conclusions of the study.