Research on Two-Level Price-Fluctuation Supply Chain Ordering Strategy Problem

Abstract

Uncertainties from retail price-fluctuation sales as well as constraints from suppliers make it difficult for retailers to place accurate orders, which have a great impact on the whole supply chain. Thus, this paper studies a supply chain ordering problem for two-level price-fluctuation sales and establishes a bilevel programming model by Copula function measuring the correlation between price and demand. The optimal order quantity is derived by transforming the bilevel programming model into a single-level model. An algorithm is given for solving the approximate optimal order quantity for the discrete model, and the convergence of the algorithm is proved. The results show that the approximate optimal order quantity decreases with the increase in the uncertainties of price and demand. Supply chain members should sell more products at the normal level, thereby increasing profits of each member in the supply chain under two-level price-fluctuation sales.