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Joint Pricing and Inventory Control of Deteriorating Items under Conditions of Finite Production, Partial Backlogging and Lost Sale

Rashidi, Mohammad | 2014

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 46188 (01)
  4. University: Sharif University of Technology
  5. Department: Industrial Engineering
  6. Advisor(s): Haji, Alireza
  7. Abstract:
  8. When demand for a product is price sensitive, pricing and lot sizing decisions are interdependent. Similarly, when a product is highly perishable, the demand may need to be backlogged to avoid costs due to deterioration, i.e., perishability and backlogging are complementary conditions.In this thesis we stablish two economic production quantity models for deteriorating items under conditions of finite production, exponential decay and partial backordering and lost sale. Two joint pricing inventory control models are developed for the problem by employing different modeling approaches over an infinite planning horizon. In two models, customer is viewed to be impatient and the fraction of the demand is backogged. We first show that for any given selling price, optimal replenishment schedule exists and unique.Then, we show that the total profit is not a concave function of price. Next, we present a simple algorithm to find the optimal solution. Since the total profit is not a concave function of price, we obtain optimal solution by repeating algorithm for different initial values of price. Also we solve a numerical example to illustrate the solution procedure and the algorithm. Our results show that under conditions of infinite planning horizon and fixed influencing factors such as cost parameters, these two models are the same. Finally to show distinctions between two models, some conditions are introduced and when only one of those conditions satisfied, two models are not the same anymore.
  9. Keywords:
  10. Lost Sale ; Pricing ; Deteriorating Items ; Joint Pricing and Inventory Control ; Exponential Decay ; Partial Backlogging

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