Channel Coordination Under Price Protection, Midlife Returns, and End-of-Life Returns in Dynamic Markets

Abstract

T his paper examines three channel policies that are used in declining price environments: Price protection (P) is a mechanism under which the manufacturer pays the retailer a credit applying to the retailer's unsold inventory when the wholesale price drops during the life cycle; midlife returns (M) allow the retailer to return units partway through the life cycle at some rebate; and end-of-life returns (E) allow the retailer to return unsold units at the end of the life cycle. Under declining retail prices, if the wholesale prices and the return rebates are set properly, then EM (i.e., midlife and end-of-life returns) achieves channel coordination. However, such a policy may not be implementable because it may require the manufacturer to be worse off as a result of coordination. If P is used in addition to EM and the terms are set properly, then PEM guarantees both coordination and a win-win outcome. If the retail price is constant over time, then EM is sufficient to guarantee both coordination and a win-win outcome.

Coordination of Limited Commercial Return

“…consider reorder, and to some extent, midlife return, but this paper focus on coordination when the supplier has two different salvage values of midlife returns. Compared to Taylor (2001) reorders at midlife are not considered but Taylor's analysis is restricted to the case when the salvage values of the supplier and retailer are identical. No such assumptions are made in this paper but prices, costs, and salvage values are allowed to vary to the extent that the conditions allow.…”

Quantifying the value of buyer–vendor coordination: Analytical and numerical results under different replenishment cost structures

“…As a remedy, another line of research in the literature proposes an alternative approach that relies on using the profit/cost gap between the centralized and decentralized approaches as an inducement to improve decentralized solutions, e.g., [9,10,12]. This alternative approach, known as channel coordination, requires the decentralized solution to be improved in a way that (i) it results in the same values for the decision variables as the centralized solution, and (ii) it suggests a mutually agreeable way of sharing the resulting profits.…”

“…Despite a growing interest in channel coordination over the past few decades [1,4,9,10,15,12,14], no detailed analytical or numerical results measuring its impact on system performance have been reported in the literature. For this reason, we revisit the classical buyer-vendor coordination problem introduced by Goyal [4] (called Goyal's Problem from now on) and extended by Toptal et al [13].…”

“…Utilizing Expressions (10) and (12) in Expression (13), and performing algebraic manipulations result in Expression (14). h…”

The State of Practice in Supply-Chain Management: A Research Perspective

“…What is less well known are the circumstances under which both the buyer and supplier will be better off by collaborating. See, for example, Monahan, 1984;Weng, 1995 andTaylor, 2001. In the absence of these circumstances ·or other incentives for collaboration, collaboration, in general 1 and CPFR, in particular, seem doomed.…”