Coordinating pricing and inventory replenishment policies for one wholesaler and one or more geographically dispersed retailers

We analyze coordination issues in a supply chain consisting of one wholesaler and one or more retailers under deterministic price-sensitive customer demand. Operating costs include purchasing, setup, order processing, and inventory costs. We consider both pricing and lot sizing decisions and take special care to correctly account for the impact of transfer prices and ownership of retail-inventory. We show that a solution that maximizes channel profits can be interpreted as consignment selling. We also show that separating pricing and lot sizing decisions is near optimal when the demand rate is sufficiently large. (C) 2002 Elsevier Science B.V. All rights reserved.