Optimal Inventory Levels and Channel Choices Decision of the E-tailer and the Supplier

This paper focused on the e-tailer and the supplier who aimed to maximize their expected profit in a single period under demand uncertainty, analyzed their optimal inventory levels in three different e-commerce channel models through constructing mathematical model, and got the analytical solution of the optimal inventory levels and expected profits of the e-tailer when the supplier with demand was in general distribution. Furthermore, through simulation experiment, this paper evaluated the impacts of Drop Shipping cost, demand uncertainty and inventory operation cost level on the optimal inventory levels and expected profits of the e-tailer and the supplier, and showed the policy of the optimal channel choices of the e-tailer, the supplier and whole supply chain. Experiment results showed that the pure-play Drop Shipping e-tailer model was optimal in most cases, and the optimal choices of the e-tailer, the supplier and whole supply chain were dependent on their actual operating scenarios.