Deterministic ordering policy with price- and stock-dependent demand under fluctuating cost and limited capacity

Authors:
Chung-Yuan Dye;Tsu-Pang Hsieh
Affiliations:
Graduated School of Business and Administration, Shu-Te University, Yen-Chao, Kaohsiung 824, Taiwan, ROC;Department of Business Administration, Aletheia University, Tamsui, Taipei 251, Taiwan, ROC
Venue:
Expert Systems with Applications: An International Journal
Year:
2011

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Abstract

In this paper, we extend the classical economic order quantity model to allow for the demand rate influenced by both selling price and displayed stock level. A finite period system is considered under inflation for deteriorating items. In addition, we impose a ceiling on the number of on-display stocks. We also allow for shortages and general partial backlogging. The objective is to maximize the discounted total profit by finding the optimal replenishment number, replenishment schedule and selling price changed periodically. An effective search procedure is provided to find the optimal solution by employing the properties derived in this paper and particle swarm optimization algorithm. Several numerical examples are used to illustrate the features of the proposed model.