A Pricing and Inventory Optimization Control Using Integer L-Shaped Method

The optimization of price and inventory control for traditional and direct supply chain with retailer and retailer manufacture stochastic demand. The manufacturer and retailer play an Stackelberg game, the manufacture acts leader and retailer acts follower. A manufacturer decides the selling price and wholesale price in traditional channel, the retailer order the products at low price and sell through traditional channel. The demand is depended upon the retail price, wholesale price, and related prices. The retailer and manufacturer profits can be increased unexpectedly, due to demand changes in traditional channel. An optimization solution can solve the dynamic pricing, inventory decisions, and order quantity to increase expected profits. An integer L-shaped method is optimization technique, to solve problem of manufacturer and retailer in forecasting the demand in traditional channel. The integer L -shaped method achieved the $\mathbf{5 5 3 7. 0 \%}$ RDP and demonstrate the value of optimization compared to MOGWO and CVaR method in decision making. The results provide insights into how the optimal pricing and inventory policies depend on the demand parameters and channel characteristics.