An innovative supplier and imitative buyer in the case of product life cycle

Author(s)

Manoj Kumar

Abstract

This paper attempts to examine the product cycle in supply chain collaboration. In a competitive market environment, supply chains members seek to reduce cost by using strategic collaboration. This study derives a model for a cooperated supply chain in which the supplier is innovator and the buyer is product imitator. The innovation of suppliers can contribute to the long-term competitiveness for the supply chain. For many supply chains, product innovation is a major factor in the product cycle, and it should be considered in the development of strategies for a supplier. In this paper, we evaluate the effectiveness of supplier product innovation as a strategic tool to enhance the competitiveness and viability of supply chain. This paper examines the effect of labor expansions, investments in R&D to the supplier innovation rates, buyers’ imitation rate, and the length of product cycle. This study derives an inventory replenishment model for a supply chain. A profit sharing policy is developed to coordinate the supply chain for the product upgrading and increase the profits of the buyer and supplier both. This study maximizes the total profit of the supplier by a search algorithm. In the model, both labor expansions and investments in R&D have the positive relationships with both innovation and imitation rates and shortens the product lifecycle.

Keywords

Supply-chain collaboration; product life cycle, supplier product innovation, buyer imitation, profit sharing policy.