Joint Inventory Control & Pricing for Deteriorating Items in a Two-Echelon Supply Chain

In this paper a joint Inventory and pricing model is developed for a deteriorating item in a two echelon supply chain with one manufacturer and one retailer. It is assumed that the rate of demand is a deterministic linear function of selling price and exponential function of time. The manufacturer produces an integer multiple of the retailer’s order quantity, called n, and sends the orders in n shipments. The model has been developed in both integrated and non integrated forms in order to find the optimal inventory management and pricing policies which maximizes the supply chain profit. The solution algorithms are also developed for both cases. A numerical example is provided to prove the efficiency of the model and solution algorithms, which shows that the supply chain profit is much higher when the integration of the members is applied.