Optimization of Supply Chain Systems with Price Elasticity of Demand

Date

2011-09-01

Author

Kaplan, Ugur
TÜRKAY, METİN
Karasözen, Bülent
Biegler, Lorenz T.

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

161
views

0
downloads

A centralized multiechelon, multiproduct supply chain network is presented in a multiperiod setting with products that show varying demand against price. An important consideration in such complex supply chains is to maintain system performance at high levels for varying demands that may be sensitive to product price. To examine the price-centric behavior of the customers, the concept of price elasticity of demand is addressed. The proposed approach includes many realistic features of typical supply chain systems such as production planning and scheduling, inventory management, transportation delay, transportation cost, and transportation limits. In addition, the proposed system can be extended to meet unsatisfied demand in future periods by backordering. Effects of the elasticity in price demand in production and inventory decisions are also examined. The supply chain model is formulated as a convex mixed-integer nonlinear programming problem. Reformulations are presented to make the problem tractable. The differential equations are reformulated as difference equations, and unbounded derivatives in the nonlinear objective function are handled with an approximation, with guaranteed bounds on the loss of optimality. The approach is illustrated on a multiechelon, multiproduct supply chain network.

Subject Keywords

Mixed-integer nonlinear programming, Supply chain management, Smoothing, Price elasticity of demand

URI

https://hdl.handle.net/11511/30709

Journal

INFORMS JOURNAL ON COMPUTING

DOI

https://doi.org/10.1287/ijoc.1100.0421

Collections

Graduate School of Applied Mathematics, Article

Suggestions

OpenMETU
Core

A multi-phase heuristic for the production routing problem Solyali, Oguz; Süral, Haldun (2017-11-01) This study considers the production routing problem where a plant produces and distributes a single item to multiple retailers over a multi-period time horizon. The problem is to decide on when and how much to produce and stock at the plant, when and how much to serve and stock at each retailer, and vehicle routes for shipments such that the sum of fixed production setup cost, variable production cost, distribution cost, and inventory carrying cost at the plant and retailers is minimized. A multi-phase heur...
Joint quantity flexibility for multiple products in a decentralized supply chain Karakaya, Selcuk; Bakal, İsmail Serdar (2013-02-01) In this study, we analyze a decentralized supply chain with a single retailer and a single manufacturer where the retailer sells multiple products in a single period. The products differ in terms of a limited number of features only. The retailer places initial orders based on preliminary demand forecasts at the beginning of the period and has an opportunity to modify its initial order after receiving perfect demand information. However, the final orders of the retailer are constrained by its initial orders...
Optimal Mechanisms to Match Supply and Demand in Contemporary Supply Chains (OPTCHAIN) Merzifonluoğlu, Yasemin(2016-2-07) Emerging production and information technologies have increased competition and consumer expectations, this leads to ever-shrinking product life cycles, volatile and unpredictable markets. In addition, natural disasters, accidents, supply disruptions increased the risk in today’s global and long supply chains. Keeping costs down and customers satisfied in a global marketplace requires companies to proactively manage supply and demand using state of art techniques, technologies and practices. This proposal d...
Optimization of long-term investments of electric distribution systems considering planning metrics KOC, Mehmet; TOR, Osman Bulent; CEBECI, Mahmut Erkut; Güven, Ali Nezih; GULER, Firat; TASKIN, Hacer; TUNCER, Atiye; OKUL, Ufuk (2017-04-21) This paper presents a dynamic planning algorithm methodology which optimizes long-term primary electric distribution network investments considering planning metrics. An algorithm which calculates a representative primary network model of distribution grids, whose primary and secondary networks are intricate, is developed. It is aimed to facilitate assessment of primary distribution network investment requirements and thereby defining grid investment candidates effectively. A planning algorithm, which consi...
Optimal pricing and production decisions in utilizing reusable containers Atamer, Busra; Bakal, İsmail Serdar; Bayındır, Zeynep Pelin (2013-06-01) In this study, we focus on pricing and production decisions in utilizing reusable containers with stochastic customer demand. We consider a manufacturer that sells a single product to the customers in reusable containers with two supply options: (i) brand-new containers and (ii) returned containers from customers. The return quantity depends on both customer demand and the acquisition fee determined by the manufacturer. The unit cost of production using brand-new containers is different than the unit cost o...

Citation Formats

U. Kaplan, M. TÜRKAY, B. Karasözen, and L. T. Biegler, “Optimization of Supply Chain Systems with Price Elasticity of Demand,” INFORMS JOURNAL ON COMPUTING, pp. 557–568, 2011, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/30709.