Inventory Control by Using Speculative Strategies in Dual Channel Supply Chain

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 Markovchain model was used to formulate total cost performance, with replenishment of inventory in accordance to Poissonprocess. Our numerical calculations divulge these findings, in the long run; (i) increasing speculation with increasingforeign search rate, rises warehouse lost sales (ii) increasing speculation, increasing local and foreign search ratewith 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 butdiminishes in its percentage contribution to total cost, (b) lost sales cost at warehouse keeps rising, and (c) ourproposed two-echelon dual-supply chain may perform better than single supply chain, and (iv) increasing local andforeign search rate against increasing total cost components, escalate total cost. According to the authors, the issueat hand is: speculation impact on total cost not only creates opportunities for manufacturers to expand their productsand gain profit but also produces a hazardous side-effect for it can collapse the product.