Study on an Advance Order Tactic in a Two-Echelon Supply Chain

With the development of the information and internet technology, Vendor-Managed-Inventory (VMI) has been adopted by more and more companies. In this paper, a two-echelon supply chain inventory decision model is discussed. The products are perishable and sold over a single selling season. First a VMI model is constructed, and the supply chain members´ optimal decisions are gained. Under VMI, the supplier takes charge of all inventory decisions and bears all inventory risk. Now an advance order tactic is introduced, under which the supplier gives the retailer a chance to place an advance order before the selling season. There are two wholesale prices after introducing the advance order tactic, and the retailer´s optimal advance order quantities are different under different wholesale prices. The supply chain is coordinated by adjusting two wholesale prices. All our findings are illustrated by a numerical example.