Close integration of pricing and supply chain decisions has strategic as well as operations level benefits
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Supply chain decision-making processes that are not tightly integrated with marketing decisions may well be costing the firm twice. First, this will promote poor operations level decisions and second, this may provide management with a view of their firm that will lead to inappropriate strategic decisions. The motivation of this paper is to explore the relationships between decision-making at various levels within the firm and, in particular, the relationship between the firm’s strategic and operations decision making. Using the case of a manufacturer managing a supply chain we show that increasing revenues may not increase profits and cutting costs may also reduce profits. We also show that the strategic or tactical view of the firm, and consequently the quality of the firm’s strategic and tactical decisions, can be highly dependent on how the firm makes low-level marketing and supply chain decisions. Our results illustrate the significant benefit available to manufacturers who can successfully and tightly integrate production, logistics, and marketing decision making. Such integration will improve operations level decisions and also provide an improved platform for tactical and strategic decisions.
KeywordsOperations–marketing interface Supply chain optimization Revenue management Pricing Supply chain management
The authors gratefully acknowledge financial support from the Natural Sciences and Engineering Research Council of Canada.
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