A Model and its Solution Method for a Two-Item Newsvendor Supply Chain with Return Policy and Demand Leakage

Abstract

We study a one-manufacturer and one-retailer type of supply chain that the manufacturer manufactures two newsvendor-type items and offers a buy-back contractual commitment to the retailer who sells the items in a stochastic demand market with various prices, allowing demand leakage from high-priced item to low-priced one. The objective of this study is to coordinate the chain by jointly determining wholesale prices, buy-back prices, retail prices and order sizes. We first derive a succinct model for the chain in which the manufacturers expected profit subject to the retailer’s optimal expected profit will be explored. And a solution method to the case of uniformly distributed error demand is subsequently proposed; accordingly, a series of examples along with graphical concavity and satisfying constraint of the manufacturer’s expected profit are conducted to validate our solution method.

Authors and Affiliations

Che-Tsung Tung, Kuo-Hsien Wang, Yu-Je Lee

Keywords

Related Articles

The Impact of Ownership Structure on the Financial Performance of Listed Insurance Firms in Nigeria

This paper examines the impact of ownership structure on the financial performance of listed insurance firms in Nigeria. The study uses panel data for seventeen (17) firms for the period 2001 – 2010 (10 years). There are...

Mechanisms for the Creation of Innovation in Contemporary Business and Economy

Innovation differentiates the company from the competition, attracts new customers and generates revenue. The struggle for customers requires constant innovation, the result of which must be the creation of new value for...

The Relationship between Audit Experience and Internal Audit Effectiveness in the Public Sector Organizations

Experience on organizational operations plays an important role in ensuring objective achievement of such organizations, likewise internal audit experience within an organizations contribute toward objective achievement...

Download PDF file
  • EP ID EP162502
  • DOI 10.6007/IJARAFMS/v4-i1/697
  • Views 101
  • Downloads 0

How To Cite

Che-Tsung Tung, Kuo-Hsien Wang, Yu-Je Lee (2014). A Model and its Solution Method for a Two-Item Newsvendor Supply Chain with Return Policy and Demand Leakage. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 397-408. https://europub.co.uk/articles/-A-162502