Effect of a linear price-sensitive demand curve on the multi-echelon supply chain s efficiency

In multi-echelon supply chains, the product made bymanufacturer with initial production costs. Then to reach theend consumer, it will pass from different levels of the supplychain. Each member of the chain is in mutual communicationwith upstream and downstream. Therefore, in order toachieve the best quality and the lowest production cost, alarge number of companies has concurrent collaborationwith many suppliers. In this paper, we consider a wholesalepricecontract where demand of the product is dependent toselling price with linear demand curve. We obtain theamount of optimal profit for each member of two-echelonand three-echelon supply chain and consequently determinethe optimal ordering pricing decisions for partners. Finally,it is proved that by increasing the number of echelons underwholesale price contract, the channel s efficiency decreasesdramatically.

Keywords:

Supply chain optimization , N-echelon supply chain , Unconstraint optimization , Wholesale price contract , Pricing