Abstract: Cooperation between members plays avital role in the supply chain. Research on the method to strengthen the cooperation betweenmembersto achieve win-win result is an important subjectin supply chain management.Nevertheless, most studies to date on supply chain pricinghave onlyassumed that the market demandis only influenced by retail price butnot in any way by logistics servicelevel. That is why our workis concerned with logistics serviceand product pricing strategies in supply chainconsisting of a manufacturer,a retailer anda TPL provider. Twodifferent models are discussed which are based on Stackelberg games and cooperativegame. Comparisons are then made about various outcomes, especially the profits, for all cases. This leadsto consider more specifically the cooperation case in which profits are the highest for both the retailerand the manufacturer, and how they should share the extra joint profit achieved by moving tocooperation. We solve this bargain problem using the Nash bargaining model.
Key words: service pricing, supply chain, game theory
1. Introduction
TheThird-Party Logistics(TPL) playsanimportant role in supply chainmanagement, whichrefers to amanner of logistics operation and management thatmanufacturer focusesonthe core business by outsourcing the logistics to the professional logisticsservice provider.
Recentstudies have indicated that core enterprisesinthe supply chain which has logisticsservice demand to strengthen the competitiveness, usually outsourcing thelogistics to the TPL provider(Gong, 2008). However, the TPL service provider that has advantage in logistics and information managementmaximizes its profitthrough the raise of the service price.As a result, the logistics service of the supply chain improvedand other members of the supply chain such as manufacturer andthe retailer have to shift the product prices correspondinglyto maintain the profits. Meanwhile, all these behaviors stimulate the demand changein turn. Generally speaking,because of the unsymmetrical information, and core enterprises’pursuing for maximizing itself profits only, it’s pretty hard to coordinate theprofits among them and to achievethe Pareto Optimality. Thus, research onthe coordinating strategies for the supply chain is of importance.
Theliterature dealing with both product pricingand service pricing at the same time is sparse, with someexceptions such asXie (2007,2008) and Gong(2008, 2009). In these papers, the authors proposed a servicepricing comparedcoordinated strategies and profits withuncoordinated ones. The difference between this paperand their worksis that we consider product pricing and service level will effect the profitssharing and supply chain coordination.