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Dynamic replenishment, production, and pricing decisions, in the face of supply disruption and random price-sensitive demand

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  • Zhu, Stuart X.

Abstract

We study a joint decision problem for replenishment, production, pricing strategies in the face of both supply and demand uncertainties. The supply of the raw material suffers from a potential supply disruption while the demand for the finished goods is price-sensitive and random. We assume that the raw material is storable and unfilled demands are fully backordered. We characterize the optimal policies for raw-material replenishment, finished-goods production, and pricing. We find that the optimal replenishment policy is an order-up-to type for a given finished-goods stock level while it is a threshold type for a given raw-material stock level. For either a given finished-goods stock level or a given raw-material stock level, the optimal production policy is a threshold type and the optimal pricing policy is a modified list-price type, respectively.

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  • Zhu, Stuart X., 2013. "Dynamic replenishment, production, and pricing decisions, in the face of supply disruption and random price-sensitive demand," International Journal of Production Economics, Elsevier, vol. 146(2), pages 612-619.
    • Handle: RePEc:eee:proeco:v:146:y:2013:i:2:p:612-619
    DOI: 10.1016/j.ijpe.2013.08.009
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    Cited by:

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    2. Ehsan Ardjmand & Gary R. Weckman & William A. Young & Omid Sanei Bajgiran & Bizhan Aminipour, 2016. "A robust optimisation model for production planning and pricing under demand uncertainty," International Journal of Production Research, Taylor & Francis Journals, vol. 54(13), pages 3885-3905, July.
    3. Snyder, Lawrence V., 2014. "A tight approximation for an EOQ model with supply disruptions," International Journal of Production Economics, Elsevier, vol. 155(C), pages 91-108.
    4. Golmohammadi, Amirmohsen & Hassini, Elkafi, 2019. "Capacity, pricing and production under supply and demand uncertainties with an application in agriculture," European Journal of Operational Research, Elsevier, vol. 275(3), pages 1037-1049.
    5. Zhu, Stuart X., 2015. "Analysis of dual sourcing strategies under supply disruptions," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 191-203.
    6. Garvey, Myles D. & Carnovale, Steven, 2020. "The rippled newsvendor: A new inventory framework for modeling supply chain risk severity in the presence of risk propagation," International Journal of Production Economics, Elsevier, vol. 228(C).
    7. Liangchuan Zhou & Surendra M. Gupta, 2019. "A Pricing and Acquisition Strategy for New and Remanufactured High-Technology Products," Logistics, MDPI, vol. 3(1), pages 1-26, February.
    8. Jain, Tarun & Hazra, Jishnu, 2017. "Dual sourcing under suppliers' capacity investments," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 103-115.
    9. Kaur, Harpreet & Prakash Singh, Surya, 2021. "Multi-stage hybrid model for supplier selection and order allocation considering disruption risks and disruptive technologies," International Journal of Production Economics, Elsevier, vol. 231(C).

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