IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Lot-sizing decisions under limited-time price incentives: A review

  • Ramasesh, Ranga V.
Registered author(s):

    The problem of determining the optimal order quantities for an inventoried item, when the vendor offers a limited-time price reduction is both interesting and important. It is interesting in that it has received continued attention of academic researchers for over four decades and it is important given its economic implication in a variety of practical settings. The extensive literature on this problem represents a fascinating confluence of: (1) economic significance and relevance to managerial practice, (2) continuing academic research interest directed at precise mathematical analysis leading to the development of rigorous and complex models and policies, and (3) elegance and adequacy of simple models and heuristic policies which are validated by the results of rigorous models and computational analysis. In this paper, we survey this literature using simple classification frameworks and then review some of the key studies. We highlight their key assumptions and findings, bring across key implications for policy implementation and academic research and identify avenues for further research.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/B6VC4-4WV781Y-1/2/0ea14a07c6c0e163e9738837d1683a3f
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 38 (2010)
    Issue (Month): 3-4 (June)
    Pages: 118-135

    as
    in new window

    Handle: RePEc:eee:jomega:v:38:y:2010:i:3-4:p:118-135
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description

    Order Information: Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
    Web: https://shop.elsevier.com/order?id=375&ref=375_01_ooc_1&version=01

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Sana, Shib Sankar & Chaudhuri, K.S., 2008. "A deterministic EOQ model with delays in payments and price-discount offers," European Journal of Operational Research, Elsevier, vol. 184(2), pages 509-533, January.
    2. Robert A. Davis & Norman Gaither, 1985. "Optimal Ordering Policies Under Conditions of Extended Payment Privileges," Management Science, INFORMS, vol. 31(4), pages 499-509, April.
    3. Grubbstrom, Robert W. & Thorstenson, Anders, 1986. "Evaluation of capital costs in a multi-level inventory system by means of the annuity stream principle," European Journal of Operational Research, Elsevier, vol. 24(1), pages 136-145, January.
    4. Markowski, Edward P., 1990. "Criteria for evaluating purchase quantity decisions in response to future price increases," European Journal of Operational Research, Elsevier, vol. 47(3), pages 364-370, August.
    5. Keren, Baruch, 2009. "The single-period inventory problem: Extension to random yield from the perspective of the supply chain," Omega, Elsevier, vol. 37(4), pages 801-810, August.
    6. Huang, Yung-Fu, 2007. "Economic order quantity under conditionally permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 176(2), pages 911-924, January.
    7. Mitra, Subrata, 2009. "Analysis of a two-echelon inventory system with returns," Omega, Elsevier, vol. 37(1), pages 106-115, February.
    8. Robert W. Grubbström & Brian G. Kingsman, 2004. "Ordering and Inventory Policies for Step Changes in the Unit Item Cost: A Discounted Cash Flow Approach," Management Science, INFORMS, vol. 50(2), pages 253-267, February.
    9. Wedad Elmaghraby & P{\i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    10. Martin, G. E., 1994. "Note on an EOQ model with a temporary sale price," International Journal of Production Economics, Elsevier, vol. 37(2-3), pages 241-243, December.
    11. Wee, H.M. & Yu, Jonas & Chen, M.C., 2007. "Optimal inventory model for items with imperfect quality and shortage backordering," Omega, Elsevier, vol. 35(1), pages 7-11, February.
    12. Kevin Hsu, Wen-Kai & Yu, Hong-Fwu, 2009. "EOQ model for imperfective items under a one-time-only discount," Omega, Elsevier, vol. 37(5), pages 1018-1026, October.
    13. Manikas, Andrew & Chang, Yih-Long & Ferguson, Mark, 2009. "BlueLinx can benefit from innovative inventory management methods for commodity forward buys," Omega, Elsevier, vol. 37(3), pages 545-554, June.
    14. Arcelus, F. J. & Srinivasan, G., 1998. "Costing partial order cycles in the temporary sale price problem," International Journal of Production Economics, Elsevier, vol. 56(1), pages 21-27, September.
    15. Goyal, S. K., 1990. "Economic ordering policy during special discount periods for dynamic inventory problems under certainty," Engineering Costs and Production Economics, Elsevier, vol. 20(1), pages 101-104, July.
    16. Arcelus, F. J. & Shah, Nita H. & Srinivasan, G., 2003. "Retailer's pricing, credit and inventory policies for deteriorating items in response to temporary price/credit incentives," International Journal of Production Economics, Elsevier, vol. 81(1), pages 153-162, January.
    17. Li, Xiaoming & Sridharan, V., 2008. "Characterizing order processes of using (R,nQ) inventory policies in supply chains," Omega, Elsevier, vol. 36(6), pages 1096-1104, December.
    18. Wang, Charles X. & Webster, Scott, 2009. "The loss-averse newsvendor problem," Omega, Elsevier, vol. 37(1), pages 93-105, February.
    19. Robinson, Powell & Narayanan, Arunachalam & Sahin, Funda, 2009. "Coordinated deterministic dynamic demand lot-sizing problem: A review of models and algorithms," Omega, Elsevier, vol. 37(1), pages 3-15, February.
    20. Joglekar, Prafulla & Lee, Patrick, 1998. "Comments on: A comparative analysis for determining optimal price and order quantity when a sale increases demand," European Journal of Operational Research, Elsevier, vol. 109(1), pages 228-241, August.
    21. Zhang, Ren-qian, 2009. "A note on the deterministic EPQ with partial backordering," Omega, Elsevier, vol. 37(5), pages 1036-1038, October.
    22. Pentico, David W. & Drake, Matthew J. & Toews, Carl, 2009. "The deterministic EPQ with partial backordering: A new approach," Omega, Elsevier, vol. 37(3), pages 624-636, June.
    23. Chakraborty, Tulika & Giri, B.C. & Chaudhuri, K.S., 2009. "Production lot sizing with process deterioration and machine breakdown under inspection schedule," Omega, Elsevier, vol. 37(2), pages 257-271, April.
    24. Dye, Chung-Yuan, 2007. "Joint pricing and ordering policy for a deteriorating inventory with partial backlogging," Omega, Elsevier, vol. 35(2), pages 184-189, April.
    25. Day, Jamison M. & Daniel Wright, P. & Schoenherr, Tobias & Venkataramanan, Munirpallam & Gaudette, Kevin, 2009. "Improving routing and scheduling decisions at a distributor of industrial gasses," Omega, Elsevier, vol. 37(1), pages 227-237, February.
    26. Sarker, Bhaba R. & Al Kindi, Mahmood, 2006. "Optimal ordering policies in response to a discount offer," International Journal of Production Economics, Elsevier, vol. 100(2), pages 195-211, April.
    27. Abad, Prakash L., 2007. "Buyer's response to a temporary price reduction incorporating freight costs," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1073-1083, November.
    28. Urban, Timothy L., 2005. "Inventory models with inventory-level-dependent demand: A comprehensive review and unifying theory," European Journal of Operational Research, Elsevier, vol. 162(3), pages 792-804, May.
    29. Ardalan, Alireza, 1994. "Optimal prices and order quantities when temporary price discounts result in increase in demand," European Journal of Operational Research, Elsevier, vol. 72(1), pages 52-61, January.
    30. Tersine, Richard J., 1996. "Economic replenishment strategies for announced price increases," European Journal of Operational Research, Elsevier, vol. 92(2), pages 266-280, July.
    31. Yao, Dong-Qing & Yue, Xiaohang & Mukhopadhyay, Samar K. & Wang, Ziping, 2009. "Strategic inventory deployment for retail and e-tail stores," Omega, Elsevier, vol. 37(3), pages 646-658, June.
    32. Ardalan, Alireza, 1995. "A comparative analysis of approaches for determining optimal price and order quantity when a sale increases demand," European Journal of Operational Research, Elsevier, vol. 84(2), pages 416-430, July.
    33. Chandra, Charu & Grabis, Janis, 2008. "Inventory management with variable lead-time dependent procurement cost," Omega, Elsevier, vol. 36(5), pages 877-887, October.
    34. Khouja, Moutaz & Park, Sungjune, 2003. "Optimal lot sizing under continuous price decrease," Omega, Elsevier, vol. 31(6), pages 539-545, December.
    35. Berling, Peter, 2008. "Real options valuation principle in the multi-period base-stock problem," Omega, Elsevier, vol. 36(6), pages 1086-1095, December.
    36. Goyal, S. K., 1996. "A comment on Martin's: Note on an EOQ model with a temporary sale price," International Journal of Production Economics, Elsevier, vol. 43(2-3), pages 283-284, June.
    37. Ouyang, Liang-Yuh & Teng, Jinn-Tsair & Goyal, Suresh Kumar & Yang, Chih-Te, 2009. "An economic order quantity model for deteriorating items with partially permissible delay in payments linked to order quantity," European Journal of Operational Research, Elsevier, vol. 194(2), pages 418-431, April.
    38. Arcelus, F. J. & Shah, Nita H. & Srinivasan, G., 2001. "Retailer's response to special sales: price discount vs. trade credit," Omega, Elsevier, vol. 29(5), pages 417-428, October.
    39. Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
    40. Goyal, S.K. & Jaber, M.Y., 2008. "A note on: Optimal ordering policies in response to a discount offer," International Journal of Production Economics, Elsevier, vol. 112(2), pages 1000-1001, April.
    41. Wang, S.M. & Chen, J.C. & Wang, K.-J., 2007. "Resource portfolio planning of make-to-stock products using a constraint programming-based genetic algorithm," Omega, Elsevier, vol. 35(2), pages 237-246, April.
    42. Kingsman, Brian G. & Boussofiane, Aziz, 1989. "Ordering and stockholding under price inflation when prices increase in successive discrete jumps," Engineering Costs and Production Economics, Elsevier, vol. 17(1-4), pages 395-407, August.
    43. G. Hadley, 1964. "A Comparison of Order Quantities Computed Using the Average Annual Cost and the Discounted Cost," Management Science, INFORMS, vol. 10(3), pages 472-476, April.
    44. Goyal, S. K. & Srinivasan, G. & Arcelus, F. J., 1991. "One time only incentives and inventory policies," European Journal of Operational Research, Elsevier, vol. 54(1), pages 1-6, September.
    45. Tersine, Richard J. & Barman, Samir, 1995. "Economic purchasing strategies for temporary price discounts," European Journal of Operational Research, Elsevier, vol. 80(2), pages 328-343, January.
    46. Prakash L. Abad, 2006. "Quantity Restrictions And The Reseller'S Response To A Temporary Price Reduction Or An Announced Price Increase," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-23.
    47. Chung, Kun-Jen & Goyal, Suresh Kumar & Huang, Yung-Fu, 2005. "The optimal inventory policies under permissible delay in payments depending on the ordering quantity," International Journal of Production Economics, Elsevier, vol. 95(2), pages 203-213, February.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:38:y:2010:i:3-4:p:118-135. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.