Authors: S.P. Nachiappan, N. Jawahar, M. Ganesh
Addresses: Department of Mechanical Engineering, Thiagarajar College of Engineering, Madurai–625 015, India. ' Department of Mechanical Engineering, Thiagarajar College of Engineering, Madurai–625 015, India. ' Department of Management Studies, Indian Institute of Technology (Madras), Chennai–600 036, India
Abstract: The turnover and profit of an organisation depend on the price and demand of its products. It is generally believed that a fair price acceptable to the partners is an important factor for better relations in VMI. Revenue-sharing is the concept by which total channel profit should be allocated among Supply Chain (SC) partners in different profit ratios. The paper, therefore, proposes a methodology to determine the common/optimal price (contract and selling prices) that protects the profit of the buyer which is the main reason for the existence of partnership, for maximum channel profit in a two-echelon SC to implement VMI. This paper analyses the effect of variations in revenue share, demand function, holding cost and setup cost on parameters such as contract and selling prices with standard data-set. The analysis indicates that the proposed approach is robust, efficient, practically viable and acceptable to SC partners.
Keywords: heuristic algorithm; pricing; revenue sharing; supply chain management; SCM; vendor managed inventory; revenue share; demand functions; holding costs; setup costs; contract prices; selling prices.
International Journal of Logistics Systems and Management, 2006 Vol.2 No.1, pp.19 - 37
Published online: 23 Nov 2005 *Full-text access for editors Access for subscribers Purchase this article Comment on this article