Total Optimization Model of Supply Chain Considering Uncertainty of Demand

Abstract

In case that products have price elasticity of demand, cooperation between the manufacturer and retailer is an effective way for maximizing total profit in overall of supply chain. In this study, we extended the conventional supply chain model to a stochastic programming model that is closer to a real problem considering uncertainty of demand with price elasticity and we proposed its solution. Moreover, we showed total profit in overall of supply chain in the model that cooperating between manufacturer and retailer was higher than locally optimization model in each component of supply chain. Key words: Supply Chain Management, Joint Economic Lot Sizing, Price Elasticity of Demand, Total Optimization, Stochastic Programming