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Determining the retailer's replenishment policy considering multiple capacitated suppliers and price-sensitive demand

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  • Adeinat, Hamza
  • Ventura, José A.

Abstract

This article presents a mixed integer nonlinear programming model to find the optimal selling price and replenishment policy for a particular type of product in a supply chain defined by a single retailer and multiple potential suppliers. Each supplier offers all-unit quantity discounts as an incentive mechanism. Multiple orders are allowed to be submitted to the selected suppliers during a repeating order cycle. The demand rate is considered to be not constant but dependent upon the selling price. The model provides the optimal number of orders and corresponding order quantities for the selected suppliers, and the optimal demand rate and selling price that maximize the total profit per time unit under suppliers’ capacity and quality constraints. In addition, we provide sufficient conditions under which there exists an optimal solution where the retailer only orders from one supplier. We also apply the Karush–Kuhn–Tucker conditions to investigate the impact of supplier's capacity on the optimal sourcing strategy. The results show that, there may exist a range of capacity values for the dominating supplier, where the retailer's optimal sourcing strategy is to consider multiple suppliers without fully utilizing the dominating supplier's capacity. A numerical example is presented to illustrate the proposed model.

Suggested Citation

  • Adeinat, Hamza & Ventura, José A., 2015. "Determining the retailer's replenishment policy considering multiple capacitated suppliers and price-sensitive demand," European Journal of Operational Research, Elsevier, vol. 247(1), pages 83-92.
    • Handle: RePEc:eee:ejores:v:247:y:2015:i:1:p:83-92
    DOI: 10.1016/j.ejor.2015.05.064
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    Cited by:

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    2. Ventura, José A. & Bunn, Kevin A. & Venegas, Bárbara B. & Duan, Lisha, 2021. "A coordination mechanism for supplier selection and order quantity allocation with price-sensitive demand and finite production rates," International Journal of Production Economics, Elsevier, vol. 233(C).
    3. Veronica Bulat & Irina Calugareanu, 2021. "The Aim of Primary and Secondary Sources in International Supply Chain Selection Process," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 608-617, December.
    4. Li, Xin & Ventura, José A. & Venegas, Bárbara B. & Kweon, Sang Jin & Hwang, Seong Wook, 2018. "An integrated acquisition policy for supplier selection and lot sizing considering total quantity discounts and a quality constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 119(C), pages 19-40.
    5. Adeinat, Hamza & Ventura, Jose A., 2018. "Integrated pricing and supplier selection in a two-stage supply chain," International Journal of Production Economics, Elsevier, vol. 201(C), pages 193-202.
    6. Adeinat, Hamza & Pazhani, Subramanian & Mendoza, Abraham & Ventura, Jose A., 2022. "Coordination of pricing and inventory replenishment decisions in a supply chain with multiple geographically dispersed retailers," International Journal of Production Economics, Elsevier, vol. 248(C).
    7. Rajiv Kumar Sharma, 2022. "Examining interaction among supplier selection strategies in an outsourcing environment using ISM and fuzzy logic approach," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 13(5), pages 2175-2194, October.

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