Inventory Management in Competition Environment Based on Customer Service

Abstract:

Based on demand uncertainty, the paper studies inventory management decision of two competing supply chains from the perspective of customer service. The paper mainly discusses two different inventory strategies, which are widely used, that is, consignment stock and VMI, and analyzes the optimal policies under three competitive scenarios, which consist of using consignment stock in both supply chains (CC mode), using VMI in both supply chains (DD mode), and using consignment stock in one supply chain but VMI another (VC mode). The paper compares equilibrium inventory level and profit of supply chain in different competitive modes, and concludes that both supply chains use VMI is equilibrium, which means that when manufacturers have right to choose inventory management policy, they prefer VMI. But it isn’t paradoxical with the phenomenon that consignment stock is common in reality, because manufacturers are forced to use consignment by retailer’s channel power.

• Periodical: Applied Mechanics and Materials (Volumes 58-60)
• Pages: 2141-2146
• DOI: https://doi.org/10.4028/www.scientific.net/AMM.58-60.2141
• Online since: June 2011
• Authors: Xiao Di, Bao Xing
• Keywords: Competition, Consignment Stock, Customer Service, Supply Chain, Vendor Management Inventory

References

[1] K. S. Moorthy. Strategic decentralization in channels[J]. Marketing Science 1988, 7(4): 335-355.

[2] N. Agrawal, A.A. Tsay. Channel dynamics under price and service competition[J]. Manufacturing & Service Operations Management, 2000, 2(4): 372-391.

DOI: 10.1287/msom.2.4.372.12342

[3] C.H. Guo ,G.Y. Chen, Price competition and equilibrium analysis in supply chain with double hybrid distribution channels [J]. Chinese Journal of Management Science, 2009, 17(3): 65-71. (in Chinese).

[4] S. C Choi. Price competition in a channel structure with a common retailer[J]. Marketing Science, 1991 , 10(4): 271-297.

DOI: 10.1287/mksc.10.4.271

[5] D. Zhang. A network economic model for supply chain versus supply chain competition[J]. the International Journal of Management Science, 2006: 283-295.

DOI: 10.1016/j.omega.2004.11.001

[6] L. Li , Information sharing in a supply chain with horizontal competition[J], Management Science, 2002, 48(9): 1196-1212.

DOI: 10.1287/mnsc.48.9.1196.177

[7] K. Ailawadi, P. Farris, E. Shames. Trade promotion: essential to selling through resellers[J], Sloan Management Review, 1999, 41(1): 83-92.

[8] B.M. Beamon. Supply chain design and analysis: models and methods[J]. International Journal of Production Economics, 1998, 55: 281-294.

DOI: 10.1016/s0925-5273(98)00079-6

[9] T. Boyaci, G. Gallego. Supply chain coordination in a market with customer service competition[J]. Production and Operations Management, 2004, 13(1): 3-22.

DOI: 10.1111/j.1937-5956.2004.tb00141.x

[10] F. Bernstein, A. Federgruen, Decentralized supply chain competing retailers demand uncertainty[J]. Management Science, 2005, 51(1): 18-29.

DOI: 10.1287/mnsc.1040.0218