Impacts of Minimum Order Quantity on a Quick Response Supply Chain

In this paper, we study the impacts of imposing a minimum order quantity (MOQ) on a two-echelon supply chain implementing quick response (QR) and consider the issue of coordination for such a system. By exploring the QR-MOQ supply chain system, we analytically prove that the retailer´s expected profit (REP) is nonincreasing in the MOQ. We further find that the MOQ that maximizes the manufacturer´s expected profit can significantly reduce the REP and the supply chain´s efficiency. Understanding that the static nature of the preagreed MOQ hinders the information updating capability brought about by QR, which, in turn, decreases the supply chain´s efficiency, we propose an innovative dynamic MOQ policy and derive the analytical conditions under which channel coordination with Pareto improvement is achieved.