Manufacturers And Retailers Under Stochastic Demand Management Strategy Research

The diversification and personalized of customer needs make it more and moredifficult for corporate decision-making. How to develop effective strategies understochastic demand is an urgent problem for enterprises. Therefore, the analysis onmanagement strategies of manufacturers and retailers under stochastic demand wouldmake a great significance for enterprises.Based on the literature review, for a two level supply chain with one manufacturerand one retailer, under stochastic demand and considering capacity constraints, thepricing policy of the manufacturer and the ordering policy of the retailer are analyzedby building the corporate decision-making model based on Stackelberg game. Kuhn-Tucker conditions are used to solve the models and the optimal pricing policy of themanufacturer, the optimal ordering policy of the retailer are obtained. Further, theimpact of capacity constraints and fluctuations in market demand on manufacturer andretailer are studied and it is derived that with the increase in production capacity ofmanufacturer, the maximum profit of manufacturer increases firstly and then decreases,the maximum expected profit of retailer increases firstly and then remains unchanged,etc.Then under stochastic demand, when the retailer only considers ordering policy,the pricing and capacity policies of the manufacturer are analyzed. The optimal pricingand capacity policies are obtained. By sensitivity analysis, it is derived that the optimalcapacity and optimal wholesale price of manufacturer is an increasing function onretail prices.Thirdly, for a two level supply chain with one manufacturer and one retailer,considering capacity constraints, the production capacity investing policy of themanufacturer and the ordering policy and pricing policy of the retailer are analyzed.Kuhn-Tucker conditions are used to solve the models and the optimal capacityinvesting policy of the manufacturer, the optimal ordering and pricing policy of theretailer are obtained. Further, the impact of capacity constraints, the whole price andthe scale of market demand on manufacturer and retailer are studied. It is derived that the correlation between the capacity and the ordering policy and pricing policy ofretailer receive the combined effect of capacity and whole price. When the optimalorder quantity of the retailer isn’t zero and the capacity is less than the critical value,the optimal order quantity has a negative relation with the capacity.Finally，when the retailer makes ordering and pricing decisions at the same time,the pricing policy of manufacturer and the pricing and production jointdecision-making are analyzed. The manufacturer’s optimal policies are obtained and itis derived that when the manufacturer only considers the pricing policy, the optimalwholesale price received the combined effect of capacity and price sensitivity ofproduct demand.