Optimal decisions in a dual-channel supply chain under simultaneous demand and production cost disruptions

Abstract

This paper studies the pricing strategies in centralized and decentralized dual-channel supply chains. It first discusses that production cost and demand disruptions are highly correlated, and they influence the pricing and production decisions. Therefore, both disruptions should be considered simultaneously. A game-theoretical method is proposed to drive optimal wholesale and retail price for manufacture and retailer under these disruptions. Then, it is shown that the optimal prices are affected by sharing demand for the direct channel in both centralized and decentralized problems. Moreover, this paper models the dual-channel supply chains with production cost and demand disruptions in two structures, disruptions increasing/decreasing the demand. The models are then solved using the KKT conditions. Finally, a numerical example is presented to show total profit of supply chain for each structure.