Coordinating a two-echelon supply chain with price and inventory level dependent demand, time dependent holding cost, and partial backlogging (Q2204217)

Summary: Coordination between two participating entities in a supply chain is very essential to sustain in the highly competitive business environment. This paper attempts to coordinate a single manufacturer single retailer supply chain in which the end customers' demand is assumed to be dependent on the retail price as well as instantaneous on-hand inventory level of the retailer. Both the production rate of the manufacturer and the holding cost of the retailer are assumed to vary with time. Shortages are allowed to occur and are partially backlogged. The wholesale price only contract is implemented to have insights of the retailer's individual strategy. The centralised model is studied as the benchmark case, and a revenue sharing contract is taken as coordination mechanism, aiming at enhancing the total average profit of the chain as well as paying both the channel members better off. A numerical example is given to illustrate the developed model.