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Inventory Model for Downward Substitution in Two-echelon Supply Chain under Stochastic Demand |
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PP: 481-486 |
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Author(s) |
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Yan-hong Qin,
Xing-hong Qin,
Qing Wu,
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Abstract |
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| The substitution between products is a common phenomenon in supply chain management when customers find their
favorite product unavailable. Product substitution can improve the availability of different products and thus improve the customer
service level, especially when the high-end product substitutes for the low-end product. In this paper, we construct profit model of
downward substitution strategy and apply the optimal theory to compute the optimal order quantity and the maximal profit under this
strategy in the first place, and then some relationships between product wholesale price, sale price, net salvage value and optimal
order quantity are investigated. By analyzing the relationship between these different factors, we can obtain the compact of substitution
strategy on product sale, which can provide management insight to real sale activity. |
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