Title: Optimal pricing and inventory decisions in a centralised and de-centralised two-echelon inventory system under nonlinear price dependent demand
Authors: Dega Nagaraju; Kalla Kiran Kumar; S. Narayanan
Addresses: Centre for Innovative Manufacturing Research (CIMR), VIT University, Vellore 632014, Tamil Nadu, India ' Mechanical Engineering, VIT University, Vellore 632014, Tamil Nadu, India ' Centre for Innovative Manufacturing Research (CIMR), VIT University, Vellore 632014, Tamil Nadu, India
Abstract: In this paper, a two-echelon inventory system with a single-manufacturer and single-retailer is considered. Mathematical model for both centralised and decentralised supply chain (SC) is developed by incorporating setup/ordering cost, carrying cost and transportation cost of the respective entities of the chain. Replenishment quantity of the retailer and the number of shipments from manufacturer to retailer are considered as the decision variables in the model. The objective of the proposed model is to demonstrate the optimality of the annual net revenue of the SC and the decision variables under nonlinear price-dependent demand. A numerical example is devised and the model is solved using the computer program written in MATLAB. Also, the sensitivity analysis is carried out to demonstrate the variation in the objective function with model parameters. From the findings of the research, it is concluded that with centralised decisions, percentage increase in the optimality of the annual net revenue of the SC decreases with manufacturer's unit cost whereas increases with retailer's unit cost.
Keywords: two-echelon inventory system; mathematical model; transportation cost; number of shipments; nonlinear price dependent demand.
International Journal of Logistics Systems and Management, 2018 Vol.29 No.3, pp.374 - 398
Received: 29 Jun 2016
Accepted: 28 Oct 2016
Published online: 16 Jan 2018 *