Bundling in a supply chain: insights and implications

The impact of bundling of products in a supply chain has not been studied in the operations management literature. Furthermore, the existing models on bundling have analysed the impact of bundling on the retailer's profits and ignored its impact on the supplier's operations. We consider an analytical model of a two-product supply chain, consisting of a retailer and a supplier selling these products either as components or as a bundle to the consumer. We analyse different bundling scenarios and determine a bundling fee that would allow the supply chain partners to use bundles to coordinate their operations to maximise their joint profits. [Received 29 June 2010; Revised 14 December 2010; Accepted 9 March 2011]