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An inventory model under price and stock dependent demand for controllable deterioration rate with shortages and preservation technology investment

Author

Listed:
  • Umakanta Mishra

    (ICFAI University, Tripura)

  • Leopoldo Eduardo Cárdenas-Barrón

    (Tecnológico de Monterrey)

  • Sunil Tiwari

    (University of Delhi)

  • Ali Akbar Shaikh

    (Tecnológico de Monterrey)

  • Gerardo Treviño-Garza

    (BNSF Railway Company)

Abstract

This paper develops an EOQ inventory model that considers the demand rate as a function of stock and selling price. Shortages are permitted and two cases are studied: (i) complete backordering and (ii) partial backordering. The inventory model is for a deteriorating seasonal product. The product’s deterioration rate is controlled by investing in the preservation technology. The main purpose of the inventory model is to determine the optimum selling price, ordering frequency and preservation technology investment that maximizes the total profit. Additionally, the paper proves that the total profit is a concave function of selling price, ordering frequency and preservation technology investment. Therefore, a simple algorithm is proposed to obtain the optimal values for the decision variables. Several numerical examples are solved and studied along with a sensitivity analysis.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:annopr:v:254:y:2017:i:1:d:10.1007_s10479-017-2419-1
    DOI: 10.1007/s10479-017-2419-1
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    References listed on IDEAS

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