Integrated inventory and pricing policies for supply chain networks

An optimization-based control framework that simultaneously determines the optimal inventory and product pricing policies is developed for multi-product, multi-echelon supply chain networks. The optimization problem aims at adjusting the available manufacturing resources, product transportation, inventories and prices for the entire supply chain network to satisfy demand while maximizing network’s revenues and service level, through the minimization of unsatisfied demand, over a specified rolling time horizon. The control scheme employs model predictive control principles with local feedback inventory controllers for the satisfaction of the overall objectives. Customer demand responses to product prices are taken directly into consideration through the explicit utilization of demand elasticity. The optimal manipulation of the product prices acts as an additional instrument for the efficient operation of the supply chain through the direction of product demand in less congested parts of the network