Title: Modelling shipment consolidation and pricing decisions for a manufacturer-distributor

Authors: M. Ali Ülkü; James H. Bookbinder

Addresses: School of Management and Leadership, Capital University, Columbus, OH 43209, USA ' Department of Management Sciences, University of Waterloo, Waterloo, ON N2L 3G1, Canada

Abstract: Consider a supply chain with one vendor and multiple buyers. That vendor not only manufactures the goods demanded, but also transports them by its own fleet of trucks to buyers that are densely dispersed in a distribution zone. The buyers are sensitive to both price and delivery-time guarantee. We model and maximise the vendors expected profit rate when the prices charged depend on the arrival times of orders. The optimal profit rate is found to be concave in the vehicle capacity. We illustrate our theoretical findings with numerical examples and sensitivity analyses to furnish managerial insights.

Keywords: logistics; revenue management; order consolidation; dispatching; differential pricing; private carriage; nonlinear optimisation; supply chain management; SCM; profit rate; vehicle capacity; modelling; shipment consolidation.

DOI: 10.1504/IJRM.2012.044516

International Journal of Revenue Management, 2012 Vol.6 No.1/2, pp.62 - 76

Published online: 28 Dec 2011 *

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