Optimal pricing and ordering policy for non-instantaneous deteriorating items under inflation and customer returns

Date

2014-01-01

Author

Ghoreishi, M.
Mirzazadeh, A.
Weber, Gerhard Wilhelm

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This paper deals with an economic production quantity inventory model for non-instantaneous deteriorating items under inflationary conditions considering customer returns. We adopt a price-and time-dependent demand function. Also, the customer returns are considered as a function of both price and demand. The effects of time value of money are studied using the Discounted Cash Flow approach. The main objective is to determine the optimal selling price, the optimal replenishment cycles, and the optimal production quantity simultaneously such that the present value of total profit is maximized. An efficient algorithm is presented to find the optimal solution. Finally, numerical examples are provided to solve the presented inventory model using our proposed algorithm, which is further clarified through a sensitivity analysis. The results of analysing customer returns provide important suggestions to financial managers who use price as a control to match the quantity sold to inventory while maximizing revenues. The paper ends with a conclusion and an outlook to future studies.

Subject Keywords

Management Science and Operations Research, Control and Optimization, Applied Mathematics

URI

https://hdl.handle.net/11511/57723

Journal

OPTIMIZATION

DOI

https://doi.org/10.1080/02331934.2013.853059

Collections

Graduate School of Applied Mathematics, Article

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Citation Formats

M. Ghoreishi, A. Mirzazadeh, and G. W. Weber, “Optimal pricing and ordering policy for non-instantaneous deteriorating items under inflation and customer returns,” OPTIMIZATION, pp. 1785–1804, 2014, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/57723.