An EOQ model for perishable products with discounted selling price and stock dependent demand
01 Mar 2009-Central European Journal of Operations Research (Springer-Verlag)-Vol. 17, Iss: 1, pp 31-53
TL;DR: How much discount on selling price may be given during deterioration to maximize the profit per unit time and whether a pre-deterioration discount affects the unit profit or not is investigated.
Abstract: A single item economic order quantity model is considered in which the demand is stock dependent. After a certain time the product starts to deteriorate and due to visualization effect and other aspects of deterioration the demand becomes constant. In that situation a discount on selling price provides significant increment in demand rate. In this paper we investigate how much discount on selling price may be given during deterioration to maximize the profit per unit time and whether a pre-deterioration discount affects the unit profit or not. A mathematical model is developed incorporating both pre- and post deterioration discounts on unit selling price, where analytical results reveal some important characteristics of discount structure. A numerical example is presented and sensitivity analysis of the model is carried out.
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TL;DR: In this paper, three unlike coordinating contracts namely (i) joint rebate contract (ii) wholesale price discount contract and (iii) cost sharing contract are proposed for two echelon supply chain coordination perspective under stock and price induced demand.
75 citations
TL;DR: In this paper, the authors focus on coordination and profit division in a manufacturer-distributer-retailer supply chain, where the manufacturer supplies a perishable product to the retailer through the distributer in a single lot.
Abstract: This paper focuses on coordination and profit division in a manufacturer–distributer–retailer supply chain. The manufacturer supplies a perishable product to the retailer through the distributer in a single lot. The product deteriorates at a constant rate and it cannot be reworked. The retailer disposes of the product without any salvage value. The manufacturer and the distributer form a coalition that shares the retailer's disposal cost aiming at channel coordination. Further, to divide the channel surplus first the retailer bargains with the coalition and then the manufacturer and the distributer bargain within the coalition. This simple side-payment contract resolves channel conflict and the channel members' profits are win–win for the disposal cost share within a range. The proposed mechanisms for coordination and surplus division are illustrated by a numerical example.
46 citations
TL;DR: A food production model with preservation technology and credit‐linked demand under default risk of capital in uncertain environment is developed with the help of parametric approach and interval mathematics to justify the validity of the proposed model.
Abstract: Due to the fluctuation of market economy and uncertainty of customers' demand, it is quite difficult to develop an appropriate inventory model under uncertain situations. To overcome this difficulty, a food production model with preservation technology and credit‐linked demand under default risk of capital in uncertain environment is developed with the help of parametric approach and interval mathematics. In this proposed model, all the inventory parameters, including demand rate, production rate and deterioration rate are considered as interval‐valued. Because of the consideration of demand rate, production rate as well as deterioration rate as interval‐valued, to represent the proposed model mathematically, the interval differential equations have been used. Solving these differential equations by using parametric approach, all the cost components and the corresponding average profit are obtained in the form of intervals. Therefore, the optimization problem of this model becomes interval‐optimization problem. Then, to solve the interval‐optimization problem, the center‐radius optimization technique is established with the help of interval order relations. With the help of this technique, the interval‐optimization problem is converted into crisp problem and then it is solved numerically by using different variants (Gaussian Quantum‐behaved Particle Swarm Optimization, Weighted Quantum‐behaved Particle Swarm Optimization, and Adaptive Quantum‐behaved Particle Swarm Optimization) of Quantum‐behaved Particle Swarm Optimization technique. Some real‐life problems are considered and solved to justify the validity of the proposed model. The same model is also analyzed in crisp environment to verify the result of interval environment. Finally, the sensitivity analyses of both crisp and interval environments are performed separately with respect to the different system parameters.
43 citations
TL;DR: A dynamic pre- and post-deterioration cumulative discount policy to enhance inventory depletion rate resulting low volume of deterioration cost, holding cost and hence higher profit is proposed.
Abstract: Product perishability is an important aspect of inventory control. To minimise the effect of deterioration, retailers in supermarkets, departmental store managers, etc. always want higher inventory depletion rate. In this article, we propose a dynamic pre-and post-deterioration cumulative discount policy to enhance inventory depletion rate resulting low volume of deterioration cost, holding cost and hence higher profit. It is assumed that demand is a price and time dependent ramp-type function and the product starts to deteriorate after certain amount of time. Unlike the conventional inventory models with pricing strategies, which are restricted to a fixed number of price changes and to a fixed cycle length, we allow the number of price changes before as well as after the start of deterioration and the replenishment cycle length to be the decision variables. Before start of deterioration, discounts on unit selling price are provided cumulatively in successive pricing cycles. After the start of deterioration, discounts on reduced unit selling price are also provided in a cumulative way. A mathematical model is developed and the existence of the optimal solution is verified. A numerical example is presented, which indicates that under the cumulative effect of price discounting, dynamic pricing policy outperforms static pricing strategy. Sensitivity analysis of the model is carried out.
42 citations
Cites background from "An EOQ model for perishable product..."
...The deterioration rate is assumed as ¼ Hðt Þ (Panda et al. 2007, 2009; Jain, Mukesh, and Priya 2008), where t is the time measured from the instant arrival of a fresh replenishment indicating that the deterioration of the items begins after a time from the instant of the arrival in stock. is a…...
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...The characteristic of ramp-type demand may be noted in the works of Mondal and Pal (1998), Wu and Ouyang (2000), Manna and Chaudhuri (2006), Panda, Saha, and Basu (2007, 2009), Panda, Senapati, and Basu (2008) and Agrawal and Banerjee (2011), etc....
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References
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TL;DR: This paper provides a comprehensive review that synthesizes existing results for the single period problem and develops additional results to enrich the existing knowledge base, and reviews and develops insight into a dynamic inventory extension of this problem.
Abstract: In the newsvendor problem, a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period. This simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory, which comprises a vast literature focusing on operational efficiency. Typically in this literature, market parameters such as demand and selling price are exogenous. However, incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level. In this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously. We provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base. We also review and develop insight into a dynamic inventory extension of this problem, and motivate the applicability of such models.
1,579 citations
Book•
01 Jan 1979
TL;DR: In this article, an in-depth discussion of the major decisions in production planning, scheduling, and inventory management faced by organizations, both private and public, is presented, as well as the latest systems used to make decisions, including Just-in-Time Manufacturing, KANBAN, Distribution Requirements Planning and PUSH Control.
Abstract: An in-depth discussion of the major decisions in production planning, scheduling, and inventory management faced by organizations, both private and public. Strategic and operational issues are covered, as well as the latest systems used to make decisions, including Just-in-Time Manufacturing, KANBAN, Distribution Requirements Planning, and PUSH Control. A series of cases focusing on one organization complement the text's discussion, and several problem sets are also included. An extensive list of references allows the advanced student to pursue topics of interest in more detail.
1,541 citations
TL;DR: The motivations, extensions and generalizations of various models in each sub-class have been discussed in brief to bring out pertinent information regarding model developments in the last decade.
1,247 citations
"An EOQ model for perishable product..." refers background in this paper
...Interested readers may consult the survey papers of Nahmias (1982), Raafat (1991) and Goyal and Giri (2001) ....
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TL;DR: This paper reviews the relevant literature on the problem of determining suitable ordering policies for both fixed life perishable inventory, and inventory subject to continuous exponential decay and considers both deterministic and stochastic demand for single and multiple products.
Abstract: This paper reviews the relevant literature on the problem of determining suitable ordering policies for both fixed life perishable inventory, and inventory subject to continuous exponential decay. We consider both deterministic and stochastic demand for single and multiple products. Both optimal and sub-optimal order policies are discussed. In addition, a brief review of the application of these models to blood bank management is included. The review concludes with a discussion of some of the interesting open research questions in the area.
1,115 citations