Bi-level Pricing and Replenishment in Supply Chains

Abstract

Effective pricing and replenishment strategies in supply chain management are the keys to business success. Notably, with rapid technological innovation and strong competition in hi-tech industries such as computer and communication organizations, the upstream component price and the down-stream product cost usually decline significantly with time. As a result, effective pricing and replenishment decision models are very important in supply chain management. This chapter first establishes a bi-level pricing and replenishment strategy optimization model in hi-tech industry. Then, two bi-level pricing models for pricing problems, in which the buyer and the vendor in a supply chain are respectively designated as the leader and the follower, are presented. Experiments illustrate that bi-level decision techniques can solve problems defined by these models and can achieve a profit increase under some situations, compared with the existing methods.