Uncoordinated supply chain

Grocery retailers have to carry store inventory to satisfy retail demand over the supplier lead time to ensure high in stock levels. Thus, retailers have to forecast demand at price levels offered. As discussed in the chapter on coordination, in an uncoordinated supply chain, double marginalization results in a lower retail service level than is optimal for the supply chain as a whole. 

Munson, Charles L., Jianli Hu, and Meir J. Rosenblatt. Teaching the Costs of Uncoordinated Supply Chains. Interfaces (2003) 33, 24-39. 

Again the retailer s profit is the sum of the entries in the last column and is equal to 28. Notice that the supply chain profit is lower than the maximum supply chain profit possible of 40.32. Note that for any wholesale price such that c + q < w < r, then Kq > K, if the service levels are greater than 50%. Thus the supply chain profits are not maximized, and the supply chain is termed uncoordinated. Notice that this remains the case even when the wholesale price varies from the current level. In general,... 

Links can be of two types. Eirst, links are the ways partners in the supply chain coordinate their joint enterprise. Links can include any of the supply chain components — physical, information, financial, or knowledge flow — and the business rules that go with them. Strong links lead to a well-coordinated effort weak ones to an uncoordinated effort. Links are also... 

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