Inventory and credit decisions for deteriorating items with displayed stock dependent demand in two-echelon supply chain using Stackelberg and Nash equilibrium solution

TLDR: A supplier-retailer supply chain in which demand for the products is displayed stock dependent and the retailer takes the benefit of permissible delay in payments from the supplier to obtain the optimal decisions of the supply chain under three different policies.

Abstract: With the prevalence of network technologies, the world is shrinking and it is observed that the decision policies of the players of the supply chain go hand in hand. Thus the optimal replenishment decisions of retailers cannot be taken in isolation and need to be integrated with that of the supplier. This research work establishes a supplier-retailer supply chain in which demand for the products is displayed stock dependent. Nowadays, trade credit is also seen as prime source of short term financing, thus the retailer takes the benefit of permissible delay in payments from the supplier. The objective of the proposed model is to obtain the optimal decisions of the supply chain under three different policies- centralized, Supplier-led Stackelberg policy and Nash equilibrium solution. In this study, the influence of trade credit offered by the supplier, replenishment decisions and integration among the players of supply chain through different centralized and decentralized policies is analyzed for deteriorating items where retailer faces displayed stock dependent demand with two storage facilities. The model is best suitable for the emerging retail markets or supermarkets with limited shelf space displaying consumable items such as grocery, consumer goods, etc. The results have been validated with the help of a numerical example. Sensitivity analysis has also been performed to study the effect of various parameters on the optimal solution.