THE JOINT ORDER AND PROMOTIONAL EFFORT DECISIONS FOR A FASION APPAREL COMMODITY UNDER PRE-ACQUIRED MARKDOWN INFORMATION

This work considers a two stage newsvendor problem that a retailer places an order of a fashion product with the short life cycle from her supplier and sells goods directly to customers. Due to the vulnerability of a product over time which results in customers losing interest, she then markdowns items. The buyback contract is adopted that the supplier pays a fixed cost per unit to redeem unsold items when the life is over. Based on this, a retailer makes the ordering and promotional effort decisions which depends on a pre-acquired markdown information before the sale starts. The development of model begins from the decentralized supply chain and later extends to the vertically-integrated supply chain. This work highlights to analyze the effect of markdown to the joint promotional effort and quantity decisions. In addition, numerical experiments illustrate the sensitivity analysis to various parameters. To achieve the channel coordination, the share of promotional effort and the penalty charged to a retailer's shortage are proposed. The performance of profit under these two methods are examined in the computational section as well.