Work

Coordination of marketing and production for price and leadtime decisions

Year: 2007

Type: article

Abstract: We study a firm which serves customers that are sensitive to quoted price and leadtime, with pricing and leadtime decisions being made by the marketing and production departments, respectively. We analyze the inefficiencies created by the decentralization of the price and leadtime decisions. In the decentralized setting, the total demand generated is larger, leadtimes are longer, quoted prices are lower, and the firm's profits are lower as compared to the centralized setting. We show that coordination can be achieved using a transfer price contract with bonus payments. We also provide insights on the sensitivity of the optimal decisions with respect to market characteristics, sequence of decisions and the firm's capacity level.

Source: IIE Transactions

DOI: 10.1080/07408170701245346

Authors: Pelin Pekgün, Paul M. Griffin, Pinar Keskinocak

Institution: Georgia Institute of Technology

Language: English

Topic: Supply Chain and Inventory Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: National Science Foundation

Awards: Collaborative Research: Intra- and Inter-Enterprise Collaborative Procurement, CAREER: Decision Technologies for Electronic Exchanges, G6671297155