An analysis of optimal pricing strategy and inventory scheduling policy for a non-instantaneous deteriorating item in a two-layer supply chain

This paper presents a production inventory system with a manufacturer-retailer supply chain dealing with the non-instantaneous deteriorating products. The two-level supply chain model is analyzed with shortage and without shortage, considering the impact of business strategies in different sectors on the collaborating market system. Firstly, the integrated system and then the decentralized system under a retail fixed-mark-up strategy are studied. Further, we show that the retailer offers a fixed-mark-up policy as a signal to the manufacturer to resolve the gaming between channel members of the supply chain. This study’s prime objective is to determine the optimal retail price, wholesale price, and inventory schedules to maximize the overall supply chain’s profit. An analytical method is used to optimize the selling price and various time-length for maximum profit. The model is demonstrated through two numerical examples, and sensitivity analysis is conducted to study the behavior of parameters. It is observed from the numerical study that the supply chain system without shortage is beneficial compared to the shortage permitted supply chain. Manufacturer profit is improved after using RFM contract in contrast with integrate system.