An Inventory Management Model for Product-Service System in Dual-Channel Supply Chain

Abstract

This paper proposes a model to study inventory management for product and service bundles under product-service system (PSS) concept. This bundle is offered to customers under the dual-channel supply chain (DCSC) structure. By PSS concept, it is expected that the products sold will increase, then the products or services that are not selling well can be bundled with goods that sell well, so as to reduce overstock or deadstock in the inventory. In terms of distribution, using the DCSC structure, sales can increase by 20% from the previous one. This research will be conducted by combining the PSS concept in the DCSC distribution structure, in terms of inventory management. Model is developed of inventory cost minimization for DCSC-PSS by considering order quantity as a decision variable. Afterwards, the model will represent two scenarios of game theory for decision making practice DCSC-PSS, Stackelberg Leadership and Vertical Nash. The initial result of the numerical experiment was DCSC’s total inventory cost, Stackelberg Leadership scenario is IDR 556,642,465.40 greater than Vertical Nash, IDR 468,614,127.10. Afterwards, sensitivity analysis based on customer acceptance (ρ) and percentage of PSS (φ). At last, it was concluded that Vertical Nash was better than Stackelberg Leadership for decision making in inventory management