A distribution free newsvendor model with consignment policy and retailer’s royalty reduction

Biswajit Sarkar, Chong Zhang, Arunava Majumder, Mitali Sarkar, Yong Won Seo

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

Reducing the system cost and achieving significant profit are the key factors for every successful business sector. A consignment contract under distribution-free approach may be a fruitful combination to achieve a profitable business. This model deals with a single-period newsvendor problem with a consignment policy. The consignment policy is an agreement between any two parties, named as the consignor and the consignee. Under Stackelberg approach, firms act as leader and follower. Both parties carry some parts of the holding cost instead of one. A new policy for paying the fixed fee to the consignee is introduced. This paper considers no specific probability distribution for customer’s demand except a known mean and standard deviation. An efficient approach is proposed to reduce the retailer’s cost and building a sustainable consignment contract. The solution of this model is obtained using distribution free approach. A comparison between the traditional supply chain policy and the consignment policy is established. The price-sensitivity on demand is analysed. Some numerical examples and graphical representations are given for both traditional and consignment policy. Result proves that consignment policy is dominating over the traditional policy and a significant reduction of retailer’s royalty is found.

Original languageEnglish
Pages (from-to)5025-5044
Number of pages20
JournalInternational Journal of Production Research
Volume56
Issue number15
DOIs
Publication statusPublished - 2018 Aug 3

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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