Pricing and ordering strategies in manufacturing and distribution alliances

Pricing and ordering strategies in manufacturing and distribution alliances

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Article ID: iaor19992159
Country: United States
Volume: 29
Issue: 8
Start Page Number: 681
End Page Number: 692
Publication Date: Aug 1997
Journal: IIE Transactions
Authors:
Keywords: inventory: order policies
Abstract:

This paper studies the effect of coordination in a manufacturing and distribution system consisting of one manufacturer and one distributor. The system operates to meet price-sensitive random demand with the objective of maximizing expected profits of both the manufacturer and the distributor. The coordinated pricing and production/ordering policies that maximize the expected profits of the manufacturer and the distributor, as well as the distributor's optimal pricing and ordering policies without coordination, are developed. The focus of this study is to address the following managerial questions: What factors make coordination an effective strategy for both the manufacturer and the distributor? What are the coordination strategies and the coordinated policies that maximize both parties' expected profits and the joint expected profit? These and other related managerial issues are explored in this paper.

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