Supply Chain Pricing in B-to-B Markets – A Case Study Application

Abstract

The purpose of this paper is to illustrate an effective coordination process in the B-to-B section of a supply chain. In particular the paper focuses on the interactions between a supplier of raw materials and a buyer processing them into end products in the food industry. These interactions are governed by a delivery contract. Under the terms of the current contract a season's entire crop is purchased at time of planting at an unit price per pound regardless of volume and quality delivered. This simplicity of the contract is an attractive feature of the interaction in the Bto-B section.It is shown that the supply chain's optimum cannot be realized with a single price. From several alternatives a pricing scheme is proposed in which prices are related to quality. The goal is to determine prices which facilitate the supply chain's maximum performance assuming rational behaviour of the supplier and the buyer. Conditions for realizing the supply chain's maximum are formulated and an approach is presented which generates a significant improvement in performance.

Towards supply chain collaboration in B2B pricing

“…This precludes the understanding of contextual variables and limits the contingency-based investigation of what supply chain contexts can effectively develop different collaborative approaches in pricing between different actors along the network. The literature review has given interesting research indications to explore collaborative pricing approaches in the agri-food context (Hines et al, 2006a, b;Haehling von Lanzenauer and Pohl, 2007;Stevenson and Pirog, 2008); it should be relevant to identify other collaborative industries in order to ascertain which other context can allow the development of similar collaborative pricing approaches, e.g. the service industry.…”