A. Tetteh, Q. Xu* and Z. Liu

Glorious Sun School of Business & Management, Donghua University Shanghai, P.R. China. *xuqi@dhu.edu.cn

ABSTRACT

This paper investigates how to control cost of inventory by analyzing the impact of speculation in a dual-supply chain. Manufacturers' exploit both traditional channel and direct channel independently to deliver goods. A four view Markov chain model was used to formulate total cost performance, with replenishment of inventory in accordance to Poisson process. Our numerical calculations divulge these findings, in the long run; (i) increasing speculation with increasing foreign search rate, rises warehouse lost sales (ii) increasing speculation, increasing local and foreign search rate with increasing total cost components results in holding cost diminishing aiding collapse of manufactures' product, (iii) as local, foreign or both search rate increase; (a) holding cost at warehouse and retailer remains constant but diminishes in its percentage contribution to total cost, (b) lost sales cost at warehouse keeps rising, and (c) our proposed two-echelon dual-supply chain may perform better than single supply chain, and (iv) increasing local and foreign search rate against increasing total cost components, escalate total cost. According to the authors, the issue at hand is: speculation impact on total cost not only creates opportunities for manufacturers to expand their products and gain profit but also produces a hazardous side-effect for it can collapse the product.

Keywords: Dual-supply Chain, Speculation, Inventory Cost, Markov Chain.

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Acknowledgements

This work is partially supported by the National Natural Science Foundation of China (71172174) and Ph.D Programs Foundation of Ministry of Education of China (20110075110003), Shanghai Pujiang Program (12PJC020), Innovation Program of Shanghai Municipal Education Commission (12ZS58). We are thankful for the financial support.

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