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Optimal pricing and production lot-size policies in imperfect production system with price-sensitive demand, reworking, scrap, and sales return

Author

Listed:
  • C. K. Sivashankari

    (R.M.K. Engineering College)

  • R. Valarmathi

    (R.M.K. Engineering College)

Abstract

In this paper, optimal pricing and the production lot size in the defective production system, price-sensitive demand, reworking, scrap, and sales returns in a third-order equation are considered. However, to the best of my knowledge, no authors have developed models for optimal pricing and production lot size policies in an imperfect production system with reworking, scrap, and sales returns in a third-order equation. Two models are developed: the first model is used to assess the optimal cycle time for formulating the price-breakeven point, and the second model is used to determine the optimal price and production lot size policies with two decision variables for a single-stage imperfect production scheme. The objective here is to obtain optimum pricing and the optimal production lot size in an imperfect production system with respect to maximizing overall profit. The price-breakeven point and profit maximization are considered in the study. Furthermore, this study shows that the price per unit increases as the quantity decreases. A mathematical model is established, and a technique for identifying the best solution is developed. A numerical example is solved, and a sensitivity analysis is conducted to investigate the impact of several factors on the ideal solution. Microsoft Visual Basic 6.0 is used to code the model's outcome validation.

Suggested Citation

  • C. K. Sivashankari & R. Valarmathi, 2023. "Optimal pricing and production lot-size policies in imperfect production system with price-sensitive demand, reworking, scrap, and sales return," Operational Research, Springer, vol. 23(3), pages 1-28, September.
    • Handle: RePEc:spr:operea:v:23:y:2023:i:3:d:10.1007_s12351-023-00779-5
    DOI: 10.1007/s12351-023-00779-5
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    References listed on IDEAS

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