IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v286y2020i1d10.1007_s10479-018-2953-5.html
   My bibliography  Save this article

Best pricing and optimal policy for an inventory system under time-and-price-dependent demand and backordering

Author

Listed:
  • Luis A. San-José

    (Universidad de Valladolid)

  • Joaquín Sicilia

    (Universidad de La Laguna)

  • Manuel González-De-la-Rosa

    (Universidad de La Laguna)

  • Jaime Febles-Acosta

    (Universidad de La Laguna)

Abstract

In this paper, we study an inventory system for products where demand depends on time and price. Shortages are allowed and are fully backordered. We suppose that the demand rate is the product of a power time pattern and a three-parametric exponential price function. The objective is to determine the economic lot size, the optimal shortage level and the best selling price to maximize the total profit per unit time. We present an efficient procedure to determine the optimal solution of the inventory problem for all possible scenarios. This procedure is illustrated with several numerical examples. A sensitivity analysis of the optimal inventory policy with respect to the parameters of the demand rate function is also given. Finally, the main contributions of this paper are highlighted and future research directions are introduced.

Suggested Citation

  • Luis A. San-José & Joaquín Sicilia & Manuel González-De-la-Rosa & Jaime Febles-Acosta, 2020. "Best pricing and optimal policy for an inventory system under time-and-price-dependent demand and backordering," Annals of Operations Research, Springer, vol. 286(1), pages 351-369, March.
    • Handle: RePEc:spr:annopr:v:286:y:2020:i:1:d:10.1007_s10479-018-2953-5
    DOI: 10.1007/s10479-018-2953-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10479-018-2953-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10479-018-2953-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yuyue Song & Saibal Ray & Shanling Li, 2008. "Structural Properties of Buyback Contracts for Price-Setting Newsvendors," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 1-18, November.
    2. Soni, Hardik N, 2013. "Optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment," International Journal of Production Economics, Elsevier, vol. 146(1), pages 259-268.
    3. Avinadav, Tal & Herbon, Avi & Spiegel, Uriel, 2014. "Optimal ordering and pricing policy for demand functions that are separable into price and inventory age," International Journal of Production Economics, Elsevier, vol. 155(C), pages 406-417.
    4. Jakšič, M. & Fransoo, J.C., 2015. "Optimal inventory management with supply backordering," International Journal of Production Economics, Elsevier, vol. 159(C), pages 254-264.
    5. Abel P. Jeuland & Steven M. Shugan, 1988. "Note—Channel of Distribution Profits When Channel Members Form Conjectures," Marketing Science, INFORMS, vol. 7(2), pages 202-210.
    6. Krishna Prasad & Bani Mukherjee, 2016. "Optimal inventory model under stock and time dependent demand for time varying deterioration rate with shortages," Annals of Operations Research, Springer, vol. 243(1), pages 323-334, August.
    7. Joaquín Sicilia & Jaime Febles-Acosta & Manuel González-De la Rosa, 2013. "Economic order quantity for a power demand pattern system with deteriorating items," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 7(5), pages 577-593.
    8. Lakshman Krishnamurthi & S. P. Raj, 1988. "A Model of Brand Choice and Purchase Quantity Price Sensitivities," Marketing Science, INFORMS, vol. 7(1), pages 1-20.
    9. Joaquín Sicilia & Jaime Febles-Acosta & Manuel González-De La Rosa, 2012. "Deterministic Inventory Systems With Power Demand Pattern," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(05), pages 1-28.
    10. Cowling, Keith & Cubbin, John, 1971. "Price, Quality and Advertising Competition: An Econometric Investigation of the United Kingdom Car Market," Economica, London School of Economics and Political Science, vol. 38(152), pages 378-394, November.
    11. Chandra K. Jaggi & Sunil Tiwari & Satish K. Goel, 2017. "Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities," Annals of Operations Research, Springer, vol. 248(1), pages 253-280, January.
    12. Youhua (Frank) Chen & Saibal Ray & Yuyue Song, 2006. "Optimal pricing and inventory control policy in periodic‐review systems with fixed ordering cost and lost sales," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(2), pages 117-136, March.
    13. Avinadav, Tal & Herbon, Avi & Spiegel, Uriel, 2013. "Optimal inventory policy for a perishable item with demand function sensitive to price and time," International Journal of Production Economics, Elsevier, vol. 144(2), pages 497-506.
    14. Feng, Lin & Chan, Ya-Lan & Cárdenas-Barrón, Leopoldo Eduardo, 2017. "Pricing and lot-sizing polices for perishable goods when the demand depends on selling price, displayed stocks, and expiration date," International Journal of Production Economics, Elsevier, vol. 185(C), pages 11-20.
    15. Maryam Ghoreishi & Gerhard-Wilhelm Weber & Abolfazl Mirzazadeh, 2015. "An inventory model for non-instantaneous deteriorating items with partial backlogging, permissible delay in payments, inflation- and selling price-dependent demand and customer returns," Annals of Operations Research, Springer, vol. 226(1), pages 221-238, March.
    16. Wu, Jiang & Skouri, Konstantina & Teng, Jinn-Tsair & Ouyang, Liang-Yuh, 2014. "A note on “optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment”," International Journal of Production Economics, Elsevier, vol. 155(C), pages 324-329.
    17. Umakanta Mishra & Leopoldo Eduardo Cárdenas-Barrón & Sunil Tiwari & Ali Akbar Shaikh & Gerardo Treviño-Garza, 2017. "An inventory model under price and stock dependent demand for controllable deterioration rate with shortages and preservation technology investment," Annals of Operations Research, Springer, vol. 254(1), pages 165-190, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sarkar, Biswajit & Seok, Hyesung & Jana, Tapas Kumar & Dey, Bikash Koli, 2023. "Is the system reliability profitable for retailing and consumer service of a dynamical system under cross-price elasticity of demand?," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    2. Luis A. San-José & Joaquín Sicilia & Manuel González-de-la-Rosa & Jaime Febles-Acosta, 2021. "Optimal Price and Lot Size for an EOQ Model with Full Backordering under Power Price and Time Dependent Demand," Mathematics, MDPI, vol. 9(16), pages 1-16, August.
    3. Herbon, Avi, 2021. "Managing an expiring product under a market that is heterogeneous in the sensitivity to the retailer's reputation," International Journal of Production Economics, Elsevier, vol. 232(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luis A. San-José & Joaquín Sicilia & Manuel González-de-la-Rosa & Jaime Febles-Acosta, 2021. "Optimal Price and Lot Size for an EOQ Model with Full Backordering under Power Price and Time Dependent Demand," Mathematics, MDPI, vol. 9(16), pages 1-16, August.
    2. Valentín Pando & Luis A. San-José & Joaquín Sicilia & David Alcaide-López-de-Pablo, 2021. "Profitability Index Maximization in an Inventory Model with a Price- and Stock-Dependent Demand Rate in a Power-Form," Mathematics, MDPI, vol. 9(10), pages 1-29, May.
    3. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    4. Gupta, Vishal Kumar & Ting, Q.U. & Tiwari, Manoj Kumar, 2019. "Multi-period price optimization problem for omnichannel retailers accounting for customer heterogeneity," International Journal of Production Economics, Elsevier, vol. 212(C), pages 155-167.
    5. Luis A. San-José & Joaquín Sicilia & Manuel González-de-la-Rosa & Jaime Febles-Acosta, 2022. "Profit maximization in an inventory system with time-varying demand, partial backordering and discrete inventory cycle," Annals of Operations Research, Springer, vol. 316(2), pages 763-783, September.
    6. Al-Amin Khan, Md. & Shaikh, Ali Akbar & Konstantaras, Ioannis & Bhunia, Asoke Kumar & Cárdenas-Barrón, Leopoldo Eduardo, 2020. "Inventory models for perishable items with advanced payment, linearly time-dependent holding cost and demand dependent on advertisement and selling price," International Journal of Production Economics, Elsevier, vol. 230(C).
    7. Hanukov, Gabi & Avinadav, Tal & Chernonog, Tatyana & Yechiali, Uri, 2020. "A service system with perishable products where customers are either fastidious or strategic," International Journal of Production Economics, Elsevier, vol. 228(C).
    8. Ata Allah Taleizadeh & Sara Tavassoli & Arijit Bhattacharya, 2020. "Inventory ordering policies for mixed sale of products under inspection policy, multiple prepayment, partial trade credit, payments linked to order quantity and full backordering," Annals of Operations Research, Springer, vol. 287(1), pages 403-437, April.
    9. Avinadav, Tal, 2020. "The effect of decision rights allocation on a supply chain of perishable products under a revenue-sharing contract," International Journal of Production Economics, Elsevier, vol. 225(C).
    10. Chernonog, Tatyana, 2020. "Inventory and marketing policy in a supply chain of a perishable product," International Journal of Production Economics, Elsevier, vol. 219(C), pages 259-274.
    11. Dharamender Singh & Anurag Jayswal & Majed G. Alharbi & Ali Akbar Shaikh, 2021. "An Investigation of a Supply Chain Model for Co-Ordination of Finished Products and Raw Materials in a Production System under Different Situations," Sustainability, MDPI, vol. 13(22), pages 1-25, November.
    12. Li, Guiping & He, Xiuli & Zhou, Jing & Wu, Hao, 2019. "Pricing, replenishment and preservation technology investment decisions for non-instantaneous deteriorating items," Omega, Elsevier, vol. 84(C), pages 114-126.
    13. Chandra K. Jaggi & Mamta Gupta & Amrina Kausar & Sunil Tiwari, 2019. "Inventory and credit decisions for deteriorating items with displayed stock dependent demand in two-echelon supply chain using Stackelberg and Nash equilibrium solution," Annals of Operations Research, Springer, vol. 274(1), pages 309-329, March.
    14. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    15. Zhang, Jianxiong & Wang, Yu & Lu, Lihao & Tang, Wansheng, 2015. "Optimal dynamic pricing and replenishment cycle for non-instantaneous deterioration items with inventory-level-dependent demand," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 136-145.
    16. Li, Yang & Liu, Feng, 2021. "Joint inventory and pricing control with lagged price responses," International Journal of Production Economics, Elsevier, vol. 241(C).
    17. Herbon, Avi, 2017. "Should retailers hold a perishable product having different ages? The case of a homogeneous market and multiplicative demand model," International Journal of Production Economics, Elsevier, vol. 193(C), pages 479-490.
    18. Su, Rung-Hung & Weng, Ming-Wei & Yang, Chih-Te, 2021. "Effects of corporate social responsibility activities in a two-stage assembly production system with multiple components and imperfect processes," European Journal of Operational Research, Elsevier, vol. 293(2), pages 469-480.
    19. Armin Jabbarzadeh & Leyla Aliabadi & Reza Yazdanparast, 2021. "Optimal payment time and replenishment decisions for retailer’s inventory system under trade credit and carbon emission constraints," Operational Research, Springer, vol. 21(1), pages 589-620, March.
    20. Avinadav, Tal & Chernonog, Tatyana & Perlman, Yael, 2015. "Consignment contract for mobile apps between a single retailer and competitive developers with different risk attitudes," European Journal of Operational Research, Elsevier, vol. 246(3), pages 949-957.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:286:y:2020:i:1:d:10.1007_s10479-018-2953-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.