An equilibrium solution to supply chain synchronisation.

Pearson, Mike (2003) An equilibrium solution to supply chain synchronisation. IMA Journal of Management Mathematics, 14 (3). pp. 165-185. ISSN 1471-678X

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The classical two-echelon problem, {(C, V), (Q, R)}, is stated as follows. A producer (manufacturer) attempts to determine the cost to charge a distributor (wholesaler/retailer) and the credit/unit to pay for unsold units returned. A distributor determines the amount of inventory to order from the producer and the retail price to charge the customer. Both the producer and the distributor attempt to maximize profit. There is no generalized equilibrium solution to this problem. The manufacturer predicts supply in order to supply demand. That is, the manufacturer allocates demand that supplies the customer. On the other hand, the retailer predicts demand in order to demand supply. That is, the retailer allocates supply that the customer demands. We observe a natural duality in the relationship between the manufacturer and the retailer. We introduce an equilibrium solution to the two-echelon problem through prediction capability and the primal–dual transformation. The stages required to establish the primal–dual solution are harmonization, cooperation, coordination and synchronization. This changes the emphasis from optimization at the manufacturer and retailer levels to the joint search for capability and optimality based on limited information exchange and coordinated allocation strategy. Previous formulations are special cases. The analysis is extended to the supply chain.

Item Type: Article
Print ISSN: 1471-678X
Electronic ISSN: 1471-6798
Uncontrolled Keywords: inventory; supply chain; newsvendor problem; forecasting; pricing; simultaneous equilibrium;
University Divisions/Research Centres: The Business School > School of Accounting, Economics and Statistics
Dewey Decimal Subjects: 600 Technology > 650 Management & public relations > 658 General management
Library of Congress Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Item ID: 2138
Depositing User: RAE Import
Date Deposited: 15 May 2008 10:50
Last Modified: 15 Jul 2015 14:09

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