Iterative search for a combined pricing and (S-1,S) inventory policy in a two-echelon supply chain with lost sales allowed

This paper considers a continuous-review two-echelon inventory control problem with one-to-one replenishment policy incorporated and with lost sales allowed where demand arrives In a stationary Poisson process The problem Is formulated using METRIC-approximation in a combined approach of pricing and (S-1.S) Inventory policy, for which an iterative solution algorithm is derived with respect to the corresponding one-warehouse multi-retailor supply chain. Specifically, decisions on retail pricing and warehouse inventory policies are made in integration to maximize total profit in the supply chain. The objective function of the model consists of sub-functions of revenue and cost (holding cost and penalty cost). To test the effectiveness and efficiency of the proposed algorithm, numerical experiments are performed The computational results show that the proposed algorithm is efficient and derives quite good decisions