Modeling of Two-echelon Inventory System under Exponential Price Dependent Demand

In the present day scenario of globalization, the concept of supply chain management (SCM) has gained significance as one of the 21 century manufacturing paradigms for improving organizational competitiveness. In this context, a two level supply chain model is developed considering a single manufacturer and single retailer. The main objective of this research is to demonstrate the optimality of the decision variables and objective function for respective entities as well as for the entire chain under exponential price dependent demand. The mathematical model is developed in two fold. First, the expression for the total variable cost of the retailer and manufacturer is developed independently and then for the entire supply chain as a function of ordering/set up costs and carrying costs. Numerical example is devised and the computer program is written in MATLAB. The model is solved for optimality of inventory level, number of shipments and the total relevant cost of the individual entities and the entire chain for coordinated and non coordinated supply chain. Also, the sensitivity analysis is carried out. From the research findings, it is evident that with supply chain coordination, the total relevant cost of supply chain decreases.