Controlling Inventory Markdown Risks of Channel Stuffing by the Apportionment of Compensation Cost

• Main Authors: Che-Wei Hsu, 許哲瑋
• Other Authors: 周雍強
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/96874963490777801474

碩士 === 國立臺灣大學 === 工業工程學研究所 === 101 === This study discusses on channel stuffing motivated by an agent: shipping excess inventory to the downstream channel. Channel stuffing allows an agent to report sales in excess of real demand in order to get more commission. But there is much more remaining stock of a dealer at the end of selling period. If the product life cycle is short, the remaining stock will be significantly price depreciated. The dealer will be damaged owing to holding the remaining stock. Once the dealer takes a huge inventory risk caused by channel stuffing, it will not accept the padding quantities unless getting a risk sharing agreement (i.e. a markdown money contract) with the manufacturer. Then manufacturer has to compensate the inventory markdown losses of dealer, which goes against the purpose of manufacturer’s profit. Since it’s not easy to find out the agent’s padding quantities, there is a classical agent problem between agent and manufacturer. Base on the above-mentioned, this study in the view of manufacturer to control inventory markdown risks caused by channel stuffing. In our model, manufacturer and agent share the inventory markdown risks together by the apportionment of compensation cost. So that manufacturer can control the padding quantities indirectly. According to the result of numerical analysis, manufacturer could improve its profit with a proper degree of padding quantities when the product price depreciation is slight. On the contrary, manufacturer should induce agent to reduce the padding quantities when the product price depreciation is serious. In addition, we also know that manufacturer should induce more pads of agent when dealer’s original order up to level is low. At the result of keeping the constant full-fill rate by dealer, the more variance of demand the more extra profit due to channel stuffing. In conclusion, manufacturer could effectively control inventory markdown risks by the apportionment of compensation cost. This mechanism ensures the completeness of an incentive plan of commission compensation.