Joint quantity flexibility for multiple products in a decentralized supply chain

In this study, we analyze a decentralized supply chain with a single retailer and a single manufacturer where the retailer sells multiple products in a single period. The products differ in terms of a limited number of features only. The retailer places initial orders based on preliminary demand forecasts at the beginning of the period and has an opportunity to modify its initial order after receiving perfect demand information. However, the final orders of the retailer are constrained by its initial orders. The manufacturer has two options for procurement. The first procurement option is regular delivery at the beginning of the period, after the initial orders of the retailer. The next one is expedited delivery, after the updated orders are received. In this setting, our objective is to characterize the optimal policies for the retailer and the manufacturer, and assess the benefits of flexibility.

► We consider a supply chain consisting of a single manufacturer and a single retailer selling multiple products.
► We focus on a joint quantity flexibility scheme that involves all products.
► The flexibility scheme enables the retailer to modify its final orders.
► We observe that the improvement in the retailer’s profit due to joint flexibility is substantial.
► Furthermore, the manufacturer may also benefit from joint flexibility considerably.