Retailer Category Management (RCM) Versus Category Captainship (CC) under Non-symmetric Product Demands(2/2)

Project Details


Pricing and shelf space allocation decision is an important and popular problemfor retailing industry and has been studied for years. In this research, we consider apricing and shelf space size decision problem in a single-retailer two-manufacturersupply chain with non-symmetric product demand function. We further study theinfluence of the non-symmetric product demand function on two common categorymanagement mechanisms: retailer category management (RCM), where the retailerdetermines product prices and category captainship (CC), where a manufacturer in thecategory determines them. In the previous studies, for the modeling simplicity, thispricing and shelf space decision problem was studied under the assumption that thetwo competing products have the same market potentials, unit production costs, orcross-price elasticity. The research under such an assumption showed that the twocompeting manufacturers will set the same wholesale price, the retailer will set thesame retail price for the two products, and the products share the retailer’s shelf spaceequally. In practice, characteristics of the two competing products would be differentwhen the products are from different manufacturers. We consider the influence ofnon-symmetric market potential, production costs, and cross-price elasticity on thepricing and shelf allocation decision problem in this research.Traditionally, the retail price decision was made by the retailer, a commonpractice called as ‘‘retailer category management’’ (RCM). Nowadays, leadingmanufacturers have to manage product categories for retailers, a practice was oftencalled as ‘‘category captainship’’ (CC). With either RCM or CC, the retailer firstdetermines the category shelf space. In RCM, the retailer then determines the retailprices of the two products subject to the shelf space and the wholesale prices quotedby the manufacturers. In CC, the retailer forms an alliance with one of themanufacturers, whom is called as the category captain. This category captaindetermines the retail prices of the two products subject to the shelf-space constraintand the wholesale price quoted by the non-captain manufacturer.In this research, we first describe non-symmetric product demand by functionsand incorporate them into the model for a pricing and shelf allocation problem. Basedon the above basic model, we additionally provide models for SCM and CC scenarios,respectively. By comparing the results between the models under different scenarios,the managers can know under what condition the CC (or RCM) benefits the channelmembers.The major contribution of this project will be lying in developing the abovemodel and demand function, and exploring its impact on pricing and shelf spaceallocation decision under two different category management mechanisms. Acomplete numerical analysis will be conducted to validate the correctness of themodel and to evaluate the system performance. Via the analysis, we provide themanagerial insights about how non-symmetric product demand influences the pricingand shelf allocation decisions, and how to choose between the RCM and CC.
Effective start/end date1/08/1631/07/17

UN Sustainable Development Goals

In 2015, UN member states agreed to 17 global Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all. This project contributes towards the following SDG(s):

  • SDG 11 - Sustainable Cities and Communities
  • SDG 17 - Partnerships for the Goals


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