OPTIMAL GROUP PURCHASING DECISIONS UNDER SUPPLY CHAIN CONTRACTS AND COMPETITION

Group purchasing (GP) is a procurement strategy by which the retailers can negotiate better prices by increasing their negotiation power through collaboration with each other. GP problem can be modeled as a generalized newsvendor problem, although it is more realistic to model this problem with stochastic demand, current literature on GP is mostly focused on problems with deterministic demand. Comparing the single retailer newsvendor vs. a newsvendor problem with multiple retailers, there has been more attention paid to the newsvendor problem with single retailer. When there are multiple retailers, competition would be another important aspect to consider, which is lacking in parts of the literature and will be considered in this research. Different contracting scenarios such as revenue-sharing and buyback contracts are other aspects which can be considered in the GP problem which has not been studied so far. Given that; four research questions are defined to investigate in this study: 1) the first question investigates the newsvendor problem with quantity discount pricing from supplier by exploring an analytical approach to solve this problem building on existing solutions from the literature; next a second novel solution approach is proposed which solves the problem in fewer steps; answering this question makes the foundation for our subsequent research questions. 2) the second research question studies the GP problem with multiple symmetric retailers; this research question is an extension of the first research question which investigates the GP supply chain consisting of multiple symmetric retailers. 3) third research question explores the solution to GP with multiple asymmetric retailers and suppliers; since this problem is complex to solve, the GP problem is divided into two sub-problems, retailers’ problem, and suppliers’ problem which are solved separately and then brought together to provide an answer to the overall GP problem, and 4) finally, fourth research question introduces different supply chain contracts to the GP problem and investigates studying the effect of these contracts on the retailers’ profit. Mathematical results as well as managerial insights are provided for each model through sensitivity analysis and numerical experiments.