Design of Multi-Echelon Supply Chain based on Pricing Strategy and Sales Contract Approach

Abstract

This paper evaluates the design of a supply chain with a multi-echelon distribution channel based on the pricing strategy and a sales contract approach where pricing decision-making is simultaneously performed in retailing and wholesale channels. The proposed network consists of the main manufacturer, a set of distribution centers, retailers, and wholesalers. The objective is to maximize the supply chain profit. The main decisions include the allocation of retailers and wholesalers to distribution centers, the order size for each distribution center, and the product price in retailing and wholesale channels for different payment mode. A mathematical mixed-integer nonlinear model was formulated and validated by a sensitivity analysis approach. It was found that the proposed model had good performance in terms of the objective function value and execution time, even for large-scale problems.