Dynamic supply chain coordination under consignment and vendor-managed inventory in retailer-centric B2B electronic markets

This study examines the dynamic performance of vertically decentralized two-echelon channel coordination for deteriorating goods under consignment and vendor-managed inventory (VMI) contracts with revenue sharing from retailer-centric business-to-business transactions in both traditional markets and electronic markets (EMs). The research presents the profit-maximization problem and devises a method for making cross-enterprise dynamic joint decisions by combining calculus with dynamic programming for a retailer-led Stackelberg supply chain under cooperative and non-cooperative game settings over a multi-period planning horizon. The applicability of the proposed model is assessed using a case study involving a highly perishable product, sliced raw fish, in a supply chain comprising a regional seafood supplier and a local store belonging to a large national retail chain. The analytical results show that, in a cooperative setting, the EM with a consigned revenue-sharing VMI contract tends to achieve lower retail prices, larger stock quantity, improved channel efficiency, and increases in both retailer and supplier profits through an additional one-part tariff. Additionally, consumers benefit from lower retail prices and society benefits from increased overall channel profits in the cooperative channel and EM. (C) 2013 Elsevier Inc. All rights reserved.