Abstract
I. Introduction
II. The Problem Description and the Model Development
III. The Optimal Strategies in the Centralized Scenario
IV. The Optimal Strategies in the Decentralized Scenario
V. The Coordination Contract
Authors
Figures
References
Abstract
With the aid of optimal control theory, the cooperative advertising problem is discussed for a supply chain under consignment contract in a competitive environment. Consider the case that the market demand of products is affected by advertising effort and goodwill, both the optimal advertising strategies and advertising participation rate in the centralized and decentralized settings are given. The state-dependent contract with the slotting fees is introduced to coordinate the considered supply chain. Our results demonstrate that the participation rate is closely related to the marginal profits of channel members and the competition intensity between products. Besides, the state-dependent contract with the slotting fees can effectively coordinate the supply chain when the contract parameters satisfy certain conditions. Finally, the sensitivity analysis of the competition intensity between products is conducted by using some simulations.
Introduction
In the past two decades, some retailers played increasing role in the supply chain and the consignment contract was adopted accordingly in many retailing industries [1]–[4]. In particular, the retailers prefer the consignment contract so that the inventory risks can be transferred to the supplier. For example, some online retailers (e.g. Amazon.com, JD.com) usually invite other suppliers to sell products through their sale platforms based on the consignment contract, where the retailers would charge a percentage of the sales price according to the item’s category when the suppliers’ products are sold at the retailer’s platform [5]–[7]. In some cases, the retailer will also sell a differentiated product through the sale platform. The two differentiated products with some common functionality often have some levels of substitutability [8], which creates a competition among the retailer and the supplier. Moreover, it should be pointed out that the enterprises have to survive and develop in the competitive market, therefore it is critical yet necessary to execute the marketing tools in order to promote their product goodwill and boost sales. For example, some efficient marketing decisions were given in [9]–[12], where the sales promotion, the product innovation and the trade credit to customers were introduced.Recently, the famous online retailer JD.com in China is commonly using various forms of advertising, promotions or anniversary sales to promote their business goodwill [13].