Coordination Model of Inventory System for Deteriorating Items With Time-varying demand Based on Revenue-sharing Contract

This paper develops a model of coordination of inventory system in a two-stage supply chain for deteriorating items with time-varying demand related to time, sale price and initial fresh degree. It is found that under Revenue-sharing Contract, there is a unique optimal order quantity and a optimal order cycle for retailer to maximize the it's profit, and optimal wholesale price for supplier to maximize the it's profit. Furthermore, in an order cycle, the decrease of fresh degree leads to a less order quantity, shorter order cycle, lower wholesale price and lower average profit; the decrease of sale price leads to a more order quantity, longer order cycle, higher wholesale price, while the average profit increases first then starts to drop. Thus, both the maintaining of fresh degree and a proper sale price are vital to maximize every parties's profit. Finally, a numerical example is given to illustrate the theoretical results of the proposed model and conduct sensitivity analysis on parameters of the proposed model.