Determination of optimal price and quantity in a two-echelon supply chain model with promotional effort and feedback effect in stochastic scenario

Abstract

The present paper analyzes a dual channel two-echelon supply chain model consisting of one manufacturer and one retailer for a single product. The retailer uses traditional retail channel whereas the manufacturer uses e-tail channel as well as retail channel to boost the sales of the product. Customer feedback is an important factor in present global business environment because from the customer feedback, the manufacturer can reveal the level of satisfaction of the customers and this can help the to improve the product quality. Good feedback from the customers also attracts other new customers to buy the products. A company can never know whether customers are getting value out of their product without customer feedback. The effects of getting customer feedback from the customers and the promotional effort by advertising or by sales team’s initiatives are taken into account in the present model. The model is solved analytically to determine the decision variables which maximize the total profit in case of decentralized as well as centralized systems and the results have been illustrated by numerical examples. The study of this paper reveals that the profit margins of the individual channel members increase considerably if the feedback of the customers on the product is considered.