Manufacturer selection and price negotiation for competitive wholesale distribution operations

This paper considers a new class of problems arising in the distribution side of supply chains. It considers cooperative market expansion and price negotiation by wholesalers and manufacturers in a class of franchise-type distribution markets. For wholesalers, expanding the coverage of geographically dispersed markets while retaining profitability of business requires new levels of price discounts from manufacturers. Manufacturers, on the other hand, attempt to limit such discounts to maintain a resale price to retailers. A successful negotiation results in a set of spatial markets with appropriate wholesale prices for each wholesaler. A sequential method is proposed for this purpose, assuming that the manufacturers and wholesalers are co-operative and they exchange relevant information. The suggested process uses two optimisation models and is illustrated with a case study.