Coordination and Optimization: The Integrated Supply Chain Analysis with Non-Linear Price-Sensitive Demand

In this work, a supply chain with coordination mechanism consisting single vendor and buyer is considered. Further, instead of price sensitive linear or deterministic demand function, a price-sensitive non-linear demand function is introduced in this paper. To find the inventory cost, penalty cost and transportation cost, it is considered that the production and shipping functions of vendor are continuously harmonized and occur at the same rate. In this integrated supply chain, the Buyer’s Linear Program (LP), vendor’s Integer Program (IP) and coordinated Mixed Integer Program (MIP) models are formulated. Numerical examples presented in this research, which include the sensitivity of the key parameters to illustrate the models.  The solution procedures demonstrate that the individual profit as well as joint profit could be increased by coordination mechanism even though the demand function is non-linear. In addition, the results illustrate that Buyer’s selling price with consumers purchasing price could be decreased which may increase the demand of the end market. Finally, a conclusion is drawn in favor of the coordinated supply chain with non-linear price sensitive demand function.