TPL Service Level and Pricing Models in Manufacturer-Retailer Supply Chains

Abstract

Cooperation between members plays a vital role in the supply chain. Research on the method to strengthen the cooperation between members to achieve win-win result is an important subject in supply chain management. Nevertheless, most studies to date on supply chain pricing have only assumed that the market demand is only influenced by retail price but not in any way by logistics service level. That is why our work is concerned with logistics service and product pricing strategies in supply chain consisting of a manufacturer, a retailer and a TPL provider. Two different models are discussed which are based on Stackelberg games and cooperative game. Comparisons are then made about various outcomes, especially the profits, for all cases. This leads to consider more specifically the cooperation case in which profits are the highest for both the retailer and the manufacturer, and how they should share the extra joint profits achieved by moving to cooperation. We solve this bargain problem using the Nash bargaining model.