The power of coordinated decisions for short-life-cycle products in a manufacturing and distribution supply chain

Abstract

This paper explores ways of conceptualizing and studying the power of coordination and strategic alliances within a manufacturing and distribution supply chain consisting of one manufacturer and one distributor. The supply chain operates to meet price-sensitive random demand of a product with a short product life cycle. We derive closed-form multi-attribute measures of performance for the supply chain in the presence of and in the absence of coordination of pricing and production/ordering decisions. The optimal coordinated pricing and production/ordering policies, as well as each party's optimal policies in the absence of coordination, are developed. Our results yield insights into basic managerial issues for this type of manufacturing and distribution supply chains.