Decision makings in discount pricing policy for imperfect production system
DOI:
https://doi.org/10.2298/YJOR180607029KKeywords:
inventory, dynamic pricing, price-discount dependent demand, optimal Price settings, imperfect item, rework, shortage, partial backloggingAbstract
In this paper, we discussed the effects of discount price on demand and profit in a diminishing market. A production plan has been suggested for an imperfect production system. Here, demand is considered to be price sensitive and negative power function of the selling price. This problem is solved by optimization, using the Hessian matrix of order three. The main objective is to find the optimal expected average profit, optimal selling price, discount rate, backorder level, and lot-size. The recommendations are provided to offer a price discount for limited sale season on different occasions. A numerical example is presented to validate the model and is graphically illustrated accordingly.References
Taleizadeh, A.A., and Noori-Daryan, M., Pricing, manufacturing and inventory policies for raw material in a three-level supply chain, International Journal of System Science, 47 (2016) 919-931.
Taleizadeh, A.A., Samimi, H., and Mohammadi, B., Stochastic machine breakdown and discrete delivery in an imperfect inventory production system, Journal of Industrial and Management Optimization, 13 (3) (2017) 1511-1535.
Pal, B., and Adhikari, S., An EPLS model for a variable production rate with stock-price sensitive demand and deterioration, International Journal of System Science: Operations & Logistics, (2017) 2330-2674.
Shah, B.J., Shah, N.H., and Shah, Y.K., EOQ model for time-dependent deterioration rate with a temporary price discount, Asia-Pacific Journal of Operational Research, 22 (2005) 479-485.
Tripathi, C.K., and Mishra, U., An inventory model for Weibull deteriorating item with price dependent demand and time varying holding cost, Applied Mathematical Sciences, (2010) 2171-2179.
Aucomp, D.C., and KuZadrall, P.J., Lot-size for one-time-only sales, Journal of Operational Society, 37 (1986) 79-86.
Arcelus, F.J., Bhadury, J., and Srinivasan, G., Buyer-seller quantity discount strategies under profit maximizing objectives: A game theoretical analysis, IJOQM, 2 (1996) 49-72.
Harris, F.W., How many parts to make at once, Factory, The Magazine of Management, 10 (1913) 135-136.
Martin, G.E., A buyer-independent quantity discount pricing alternatives, Omega, 21 (1993) 567-572.
Wee, H.M., Joint pricing and replenishment policy for deteriorating inventory with declining market, International Journal of Production Economics, 40 (1995) 163-171.
Wee, H.M., and Yu, J., A deteriorating inventory model with a temporary price discount, International Journal of Production Economics, 53 (1997) 81-90.
Konstantaras, I., Goyal, S.K., and Papachristos, S., Economic ordering policy for an item with imperfect quality subject to the in-house inspection, International Journal of Systems Science, 38 (2007) 473-482.
Arrow, K.J., Harris, T., and Marschak, J., Optimal inventory policy, Econometrica, 19 (1951) 250-272.
Shah, N.H., Patel, A.R., and Lou, K.R., Optimal ordering pricing policy for price sensitive stock-dependent demand under progressive payment scheme, International Journal of Industrial Engineering Computations, 2 (2011) 523-532.
Shah, N.H., Ordering Policy for inventory management when demand is stock dependent and a temporary price discount is linked to order quantity, Revista Investigatio Operacional, 33 (2012) 233-244.
Bastian, M., A perfect lot-tree procedure for the discounted dynamic lot-size problem with speculation, Naval Research Logistics, 30 (1992) 651-668.
Carlson, M.L., Milterburg, G.J., and Rousseau, G.J., EOQ and quantity discounts under date-times supplier credit, Journal of Operations Research Society, 47 (1996) 384-394.
Haider, M.L., Salameh, M., and Nasr, W., Production lot sizing with quality screening and rework, Applied Mathematical Modelling, 40 (2016) 3242-3256.
Salameh, M.K., and Jaber, M.Y., Economic production quantity model for items with imperfect quality, International Journal of Production Economics, 64 (2000) 59-64.
Sajadieh, M.S., Akbari, M., and Jokar, R., Optimizing Shipment ordering and pricing policies in a two-stage supply chain with price-sensitive demand, Transportation Research Part E, 45 (2009) 564-571.
Jaber, M.Y., Goyal, S.K., and Imran, M., Economic production quantity model for items with imperfect quality subject to learning effects, International Journal of Production Economics, 115 (2008) 143-150.
Abad, P.L., Buyers response to a temporary price reduction incorporating freight costs, European Journal of Operational Research, 182 (2007) 1073-1083.
Yang, P.C., Wee, H.M., Chung, S.L., and Hungh, Y., Pricing and replenishment strategy for a multi market deteriorating product with time varying and price sensitive demand, Journal of Industrial and Management Operation, 9 (2013) 769-787.
Yang, P.C., Pricing strategy for deteriorating items using quantity discount when demand is price sensitive, European Journal of Operational Research, 157 (2004) 389-397.
Abad, P.L., Joint price and lot-size determination when supplier offers incremental quantity discounts, Journal of Operational Research Society, 13 (1988) 603-607.
Abad, P.L., Optimal pricing and lot size under conditions of perishability and partial backordering, Management Science, 42 (1996) 1093-1104.
Abad, P.L., Optimal price and order size for a reseller under partial backordering, Computers & Operations Research, 28 (2001) 53-65.
Joglekar, P., Lee, P., and Farahani, A.M., Continuously increasing price in an inventory cycle an optimal strategy for E-Tailers, Hindawi Publishing Corporation Journal of Applied Mathematics and Decision Sciences, 1 (2008) 114.
Baker, R.C., Inventory policy for items on sale during regular replenishment, PIM, 17 (1976) 55-63.
Wilson, R.H., A scientific routine for stock control, Harvard Business Review, 13 (1934) 116-128.
Tirpathi, R.P., and Tomar, S.S., Optimal order policy for deteriorating item with time dependent demand in response to temporary price discount linked to order quantity, International Journal of Mathematical Analysis, 23 (2015) 1095-1109.
Banerjee, S., and Sharma, A., Optimal procurement and pricing policies for inventory models with price and time dependent seasonal demand, Mathematical and Computer Modelling, 51 (2010) 700-714.
Sana, S.S., Optimal selling price and lot size with time varying deterioration and partial backlogging, Applied Mathematics and Computation, 217 (2010) 185-194.
Sana, S.S., Price sensitive demand for perishable item an EOQ model, Applied Mathematics and Computation, 217 (2011) 6248-6259.
Viswanathan, S., and Wang, Q., Discount pricing decisions in distribution channels with price-sensitive demand, European Journal of Operational Research, 149 (2003) 571-587.
Whitin, T.M., Inventory control research: a survey, Management Science, 1 (1954) 32-40.
Roy, T., and Chaudhuri, K.S., Price-sensitive imperfect production inventory model with exponential partial backlogging, Journal of Operational Research, (2008) 21.
Khedlekar, U.K., Shukla, D., and Namdeo, A., Pricing policy for declining demand using item preservation technology, SpringerPlus, 5 (2016) 1957.
Mishra, V.K., Inventory model of deteriorating item with revenue sharing on preservation technology investment under price sensitive stock dependent demand, International Journal of Mathematical Modelling & Computations, 6 (21) (2016) 37-48.
Wee, H.M., and Yu, J., A deterioration inventory with temporary price discount, IJPE, 53 (1997) 81-90.
Teksan, Z.M., and Geunes, J., An EOQ model with price-dependent supply and demand, International Journal of Production Economics, 178 (2016) 22-33.
Downloads
Published
Issue
Section
License
Copyright (c) 2019 YUJOR
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
