In this paper, we consider coordination issues of a distribution system composed of a manufacturer and a retailer. The manufacturer offers a single product to the retailer and the demand for the product at the retailer's end is stock dependent. We focus on three aspects of the resulting supply chain. First, we discuss the manufacturer-Stackelberg game structure to determine how the manufacturer sets the wholesale price of the product and how the retailer in turn determines the order quantity. We assume that both the parties share relevant cost information. Then we develop a simple profit-sharing mechanism that would ultimately achieve perfect channel coordination. Finally, the manufacturer is provided with a quantity discount scheme to induce the retailer to increase the order quantity so as to maximize the manufacturer's profit. We show that this discount scheme also achieves the perfect coordination of the whole channel. Numerical examples are used to illustrate the models.

A "manufacturer" supplies a "staple" product to a large number of "retailers" having very different sales volumes. Many models have considered how the "manufacturer" should design a quantity-discount (QD) scheme to induce the retailers to order in larger batch sizes. Our models differ from most existing ones in three aspects. First, we consider situations with a much larger number of retailers. Second, our manufacturer does not need to coordinate her replenishment cycles with those of the retailers. Third, besides "QD" schemes, we also consider "handling-charge reduction" ("HCR") schemes (i.e., a retailer pays a lower handling charge if his order is sufficiently large). We develop models and solution procedures for designing QD and HCR schemes that maximize the manufacturer's expected gain. We consider schemes with one as well as two "price breaks" (i.e., order size (s) needed to qualify for a QD or HCR). Examples of noteworthy characteristics revealed by our analytical and numerical analyses are (i) an optimal QD scheme will have a high enough price break such that extremely few retailers will be big enough to get a "free" discount and (ii) an optimal HCR scheme produces practically the same magnitude of expected total gains as an optimal QD scheme.

In a decentralized supply chain, local decision-makers at different echelons of the supply chain usually pursue their own maximizing-profits. However, a decision that is locally optimal could be globally inefficient. Through the revenue sharing mechanism, this paper proposes a supply-chain contract model to coordinate the pricing decision in a multi-echelon supply chain with a deterministic price-sensitive demand. We identify the conditions under which the contract can achieve channel coordination as well as improve the profits of all the supply chain members, and also present how to modify the contract parameters so as to more evenly share the profit along the chain.

This paper considers the pricing and quantity decisions of a two-echelon system with a manufacturer who supplies a single product to two competitive retailers. A Stackelberg structure is assumed between two echelons in the two-echelon chain, in which the manufacturer who acts as a leader declares her wholesale price to both retailers and the duopolistic retailers who act as followers set their sale prices and associated order quantities independently under the manufacturer's pricing scheme. The paper analyzes the effects of the duopolistic retailers' different competitive behaviors-Cournot, Collusion and Stackelberg-on the optimal decisions of the manufacturer and the duopolistic retailers themselves. The results indicate that: (i) among the three scenarios, the duopolistic retailers' action in collusion makes the retailers charge the highest sale price while the duopolistic retailers' Cournot behavior results in the lowest pricing of the retailers; (ii) the more drastic the duopolistic retail market competes, the higher the manufacturer's and the duopolistic retailers' pricing should be; and (iii) the total profit of the duopolistic retailers who act as the followers will exceed the more powerful manufacturer's profit as long as the degree of dissimilarity between the duopolistic retailers' market demands is large enough.

This paper considers a two-echelon channel in which a monopolistic manufacturer supplies a single product to multiple heterogeneous retailers who are in separate markets. The present paper studies the problem of how the manufacturer in a manufacturer-Stackelberg game designs a unified quantity-discount pricing scheme to improve the whole channel's profit as well as each partner's profit. Considered in the paper are two types of unified quantity-discount pricing schemes: the regular quantity-discount pricing scheme and the incremental volume discount pricing scheme. Each of the two types of schemes includes a single pricebreak discount policy and a non-linear quantity discount policy. Optimal solutions are derived and numerical examples presented to illustrate the efficiency of each discount policy.