Decentralized Inventory Control Strategy in Dual-channel Supply-Chain with Service Level Influence

The decentralized inventory control strategy is discussed for a dual-channel supply chain with a service level influence in this paper. First, the concept of demand influence coefficient is proposed according to the relationship among price, service level, and the demands in the channels. Then, the expression of demand influence coefficient is explored by analyzing the existing work in the literature. Then, under the condition that the aggregate demand in the dual-channel supply chain is randomly distributed, the inventory control models containing demand influence coefficient in the online and traditional channels are established. With the models, under the target of maximum gain in unit time, the expressions of the optimal order quantity of the manufacturer and retailer are presented. It proves that a local optimum obtained by the method can result in a global optimum in the decentralized supply chain in spite of the influence of service level. This implies that the proposed strategy can achieve the target of overall revenue maximization in the supply chain. Finally, numerical analysis is studied, which indicates that the algorithm can solve the problem effectively and demonstrates the value of demand influence coefficient.