Abstract: With the development of consumers’ individualized demand and the aggravation of market uncertainty demand, the decision-making problem of double-channel closed-loop supply chain considering logistics service level with random demand is studied. Mathematical modeling, optimization theory, and case study method of numerical simulation are used to implement the research. With the goal of profit maximization, a two-stage dynamic Steinberg game model for centralized and decentralized decision-making is constructed, which is solved by reverse induction. A supplier-shared service cost decision model is developed, and the maximum inventory quantity and the optimal service level, as well as the optimal allocation coefficient of service cost sharing, are solved to meet the stochastic demand of two channels. Through simulation analysis, it is concluded that the overall profit of the manufacturer, retailer and supply chain can be optimized when the supplier makes service cost allocation decision.

Key words: dual-channel supply chain, closed-loop supply chain, inventory management, service level, supply chain decision making