ITIO analysis based on discount sale price and flexibility of delivery capacity

Decision rights affect the performance of of supply chain as well as the optimal decisions. In this paper, we develop retailer-led model of decentralized optimization, supplier-led model of decentralized optimization and the model of inventory-transportation integrated optimization(ITIO) based on delivery capacity and discount sale price. Study shows that supplier and retailers' optimal strategies depend on their profit share in ITIO. When their profit shares in ITIO is bigger than their profits in decentralized optimization, they will adopt ITIO strategy. When their profit shares in ITIO is smaller than that in decentralized optimization, they will adopt decentralized optimization strategy. In retailer-led model of decentralized optimization, flexibility of delivery capacity has positive effect on the distribution frequency, while supplier's sales price discount has negative effect on the distribution frequency. In supplier-led model of decentralized optimization, supplier's sales price discount has positive effect on the distribution frequency, but flexibility of delivery capacity has no effect on distribution frequency. In ITIO, flexibility of delivery capacity has positive effect on distribution frequency, but supplier's sales price discount has no effect on distribution frequency. The impact of supplier's sales price discount and flexibility of delivery capacity on distribution quantity are opposite to their effects on distribution frequency.