C O O P E R A T I V E A D V E R T I S I N G I N A T H R E E L E V E L S U P P L Y C H A I N
Author(s):
Abstract:
Cooperative advertising is an important instrument for aligning decisions in supply chains, and research on it has been continuously active over the last decade. In this paper, we have studied effects of coordination of cooperative advertisement on the profit of all members of a supply chain. The study consists of a three level supply chain; one manufacturer, one distributor and one retailer, with cooperative and non cooperative advertising schemes. The study is conducted in two phases. In phase one, the effect of a non-cooperative advertising scheme on the profit of all parties is studied. The optimal value of the decision-making variables is determined using Stackelberg equilibrium. In this phase, the optimal value of advertisement expenditures of the manufacturer, distributer and retailer and their selling prices were determined. In the second phase, the effect of a cooperative advertising scheme on the profit of the supply chain members is modeled and, by solving the equations, the optimal value of advertisement expenditure and selling prices of the manufacturer, distributer and retailer were obtained. The sensitivity of the model was tested using a numerical example. It was shown that the total supply chain profit in cooperative advertising is higher than in a non-cooperative scheme. The result of the study gives a clear picture of the competition and cooperative advertising strategies between channel members. It was found in the none-cooperative advertising scheme that the retailer attempts to increase his profit by increasing his selling prices in higher advertisement expenditure. The leader (manufacturer), will always push the follower (the retailer or the distributor) to have more expenditure in the advertisement. In this case, the retailer defrays more advertising expenditure and, due to higher retail prices, his profit is higher than other parties. In summary, it was found that coordination in the advertisement expenditure increases the profit of all supply chain members. Therefore, to increase the profits of all parties in a supply chain, we recommend cooperative advertising, with a partnership relationship between manufacturer, distributer and retailers.
Keywords:
Language:
Persian
Published:
Industrial Engineering & Management Sharif, Volume:29 Issue: 1, 2013
Pages:
71 to 76
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