Coordination of pricing and production-scheduling decisions in supply chains

Abstract

Integration of various business functions ranging from procurement and distribution activities to customer relations has gained importance due to the progressively increasing global and domestic competitive pressures. As a consequence, many firms have set out to design, develop, and install their supply chain solutions. The existing literature on wholesale price contracts takes into account the ordering and inventory holding component of the total. However, the impact of capacity considerations is overlooked in the coordination of replenishment decisions. In this thesis, our objective is to synchronize the production planning and pricing decisions in buyer-vendor systems. In order to achieve this objective, the vendor quotes a price schedule that is a function of delivery time and order quantity. This price schedule stimulates the manipulation of buyer’s order time and quantities so as to minimize vendor’s total costs without changing the buyers’ profit position.