This research develops two models to consider retailer sales promotion and manufacturer trade promotion under demand uncertainty. The objective of the first model is to determine the retailer’s optimal promotional effort and order quantity while maximizing the retailer’s profit under exogenous trade promotion. The second model extends the first to consider the manufacturer’s endogenous trade promotion decisions. For these models, three different trade promotion policies (off-invoice, scan-back, unsold-discount) have been compared to identify the policy that can increase the manufacturer’s and the retailer’s profits. For the model with exogenous trade promotion, the retailer’s promotional effort level, order quantity, and profit are highest under the off-invoice trade promotion policy. With respect to the manufacturer’s endogenous trade promotion decisions, the retailer’s promotional effort level, order quantity, and profit, and the manufacturer’s profit are higher under the off-invoice policy than under the scan-backs policy. When comparing the three different trade promotion policies, we also find that the wholesale price is a key factor that influences a manufacturer’s profit. Our research sheds light on the importance of trade promotion policy in supply chain management.
Keywords: Supply chain management, replenishment, trade promotion, sales promotion, promotional effort
@article{RO_2021__55_S1_S119_0,
author = {Tsao, Yu-Chung and Fan, Hui-Ling and Liao, Lu-Wen and Vu, Thuy-Linh and Lee, Pei-Ling},
title = {Two-level promotion and ordering policy in a supply chain},
journal = {RAIRO. Operations Research},
pages = {S119--S145},
year = {2021},
publisher = {EDP-Sciences},
volume = {55},
doi = {10.1051/ro/2019086},
mrnumber = {4237378},
zbl = {1479.90021},
language = {en},
url = {https://www.numdam.org/articles/10.1051/ro/2019086/}
}
TY - JOUR AU - Tsao, Yu-Chung AU - Fan, Hui-Ling AU - Liao, Lu-Wen AU - Vu, Thuy-Linh AU - Lee, Pei-Ling TI - Two-level promotion and ordering policy in a supply chain JO - RAIRO. Operations Research PY - 2021 SP - S119 EP - S145 VL - 55 PB - EDP-Sciences UR - https://www.numdam.org/articles/10.1051/ro/2019086/ DO - 10.1051/ro/2019086 LA - en ID - RO_2021__55_S1_S119_0 ER -
%0 Journal Article %A Tsao, Yu-Chung %A Fan, Hui-Ling %A Liao, Lu-Wen %A Vu, Thuy-Linh %A Lee, Pei-Ling %T Two-level promotion and ordering policy in a supply chain %J RAIRO. Operations Research %D 2021 %P S119-S145 %V 55 %I EDP-Sciences %U https://www.numdam.org/articles/10.1051/ro/2019086/ %R 10.1051/ro/2019086 %G en %F RO_2021__55_S1_S119_0
Tsao, Yu-Chung; Fan, Hui-Ling; Liao, Lu-Wen; Vu, Thuy-Linh; Lee, Pei-Ling. Two-level promotion and ordering policy in a supply chain. RAIRO. Operations Research, Tome 55 (2021), pp. S119-S145. doi: 10.1051/ro/2019086
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