Coordination of a Supply Chain with Demand Stimulation and Random Demand Disruption

Literature Review

This article is closely related to price and service decisions, supply chain coordination management and disruption management. When customers buy goods, they focus on not only price, but also service level. Thus, the firms should jointly determine retail price and service level to maximize their profits. Tsay and Agrawal (2000) study coordination strategies when the retailers use price as well as service to directly compete for end customers. Gilbert and Cvsa (2003) examine the trade-off that is faced when a firm’s channel partner has opportunities to invest in either innovation of cost reduction or quality improvement, i.e., demand enhancement. Raju and Zhang (2005) consider the price-service decisions of the dominant retailer, where the competitive fringe is a price follower and cannot provide service. Xiao and Yang (2008) study the price-service competition between two channels, where each chain consists of one supplier and one retailer. In our model, the retailer jointly determines its price and service decisions.