Supply chain management for items with inventory-and price-dependent demand

Abstract

This thesis considers three coordinated decision problems associated with pricing, inventory, and distribution policy considering price-and-inventory dependent customer demand. Integration of a two-stage deteriorating-product supply chain having supplier’s manufacturing capacity is considered in Chapters 2 and 3. Combining two sales channels having different demand patterns is considered in Chapter 4. In Chapter 2, a two-stage supply chain composed of manufacturing, delivery, and sales processes between a supplier and a retailer is considered where deteriorating items are supplied under contract manufacturing. Supplier’s production rate is subject to upper capacity, and customer demand depends on shelf space size and retail price. The objective is to maximize average profit per unit time in the whole integrated chain where inventory holding cost, ordering (or setup) cost, deteriorating cost, procurement (or production) cost, and sales revenue are incorporated. For the problem, the associated profit function is derived with various decision variables including supplier’s production plan (including production rate), retailer’s order quantity, retailer’s order-up-to level and retail price. Optimal solution algorithm is obtained based on optimal solution properties. As a result, it is identified that the supply-chain optimal policy leads considerable profit increase compared to retailer’s independent optimal decision. Moreover, supply chain integration effect, inventory control policy, performance of the approximation are all investigated. In Chapter 3, supply chain integration effect is investigated when customer’s demand is dependent on on-hand inventory level. Numerical experiment and the associated sensitivity tests show that the supply-chain optimal decision leads considerable profit increase compared to retailer’s independent (non-integrated) optimal decision. Moreover, comparison between the initial stock level-dependent model and the on-hand stock leve...