Strategic Inventory Under Different Supply Chain Structure

In the vertical supply chain structure with a supplier and a retailer, retailer’s procurement and sales activities have multi-stages. Retailer holds inventory as a competitive tool to satisfy strategic purpose regardless of traditional storage-holding reasons. This is called strategic inventory in vertical contract. This strategy helps retailer convert himself from a pure price receiver to a price setter. This thesis discusses the game problem between supplier and retailer under the background of strategic inventory. Firstly, the supply chain structure with a single supplier and a monopolistic retailer is discussed. Competition between retailers is introduced into the model based on the basic model to discuss the structure of a single supplier and two competitive retailers.In the monopolistic situation, the basic model of strategic inventory is built firstly to elaborate the purpose of holding strategic inventory, based on which some negative factors to supply chain coordination are found. It is necessary to introduce coordination mechanism like rebates contract. "Manufacturer to Consumer" rebates contract and "Manufacturer to Retailer" rebates contract are compared in this thesis and these two types of contracts are of substitutability. Besides, when manufacturer has productivity constraints, his productivity is prone to influent the strategic inventory.The high line of this thesis lies in the structure of a single supplier and two competitive retailers. One retailer adopts traditional procurement and sale strategic while the other retailer adopts strategic inventory. Competition models of static game of perfect information and dynamic games of complete information are built to discuss the order quantity, retail price, inventory level and profits as well as the changes of supplier’s decision. The retailer can only benefit from strategic inventory when the inventory cost is low, and the free-ride effect exists in the retailer who adopts traditional strategic. The supplier will always benefits from the retailers’ competition under the strategic inventory.