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Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains

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Abstract

Trade promotion plays a critical role in real-world marketing and operations management. However, previous research paid rare attention to how to provide trade promotions in a sustainable manner when consumer demand is disrupted. Considering that demand disruption is becoming surging because of the digital economy, it is quite necessary to discern the managerial implications for sustainable trade promotion practice in demand disruption scenarios. For this purpose, we analyze trade promotions under demand disruption by integrating demand uncertainty and limited capacity into a stylized demand disruption model. Three trade promotion types, i.e. off-invoice, scan-back, and revenue-sharing, are examined, and optimal promotion decisions are derived for each strategy. Our results show that both manufacturer and retailer would adopt aggressive pricing strategies as the demand disruption being intensified. For trade promotion strategies, our results show that, for a certain level of demand disruption, the manufacturer prefers off-invoice rather than revenue-sharing when the manufacturer needs to offer a more aggressive trade promotion. This result indicates that, when aggressive trade promotions are needed, the manufacturer may be worse off by a revenue-sharing strategy, even though the revenue-sharing could coordinate a supply chain.

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Acknowledgements

This research is supported by National Natural Science Foundation of China (No. 71571173), Top-Notch Young Talents Program of China, and the Research Center of Modern Logistics Engineering of USTC. Dr. Xiang Ji also thanks financial supports from China Postdoctoral Science Foundation (Nos. 2017M622027, 2018T110630) and the Fundamental Research Funds for the Central Universities (No. WK2040160029).

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  1. School of Management, University of Science and Technology of China, Hefei, China

    Jie Wu, Zhixin Chen & Xiang Ji

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Wu, J., Chen, Z. & Ji, X. Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains. Ann Oper Res 290, 115–143 (2020). https://doi.org/10.1007/s10479-018-2964-2

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