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Analysis and applications of replenishment problems under stepwise transportation costs and generalized wholesale prices

Dinçer Konur and Ayşegül Toptal

International Journal of Production Economics, 2012, vol. 140, issue 1, 521-529

Abstract: In this study, we analyze the replenishment decision of a buyer with the objective of maximizing total expected profits. The buyer faces stepwise freight costs in inbound transportation and a hybrid wholesale price schedule given by a combination of all-units discounts with economies and diseconomies of scale. This general cost structure enables the model and the proposed solution to be also used for the supplier selection of a buyer under the single sourcing assumption. We show that the buyer's replenishment problem reduces to finding and comparing the solutions of the following two subproblems: (i) a replenishment problem involving wholesale prices given by an all-units discount schedule with economies of scale and a lower bound on the replenishment quantity, and (ii) a replenishment problem involving wholesale prices given by an all-units discount schedule with diseconomies of scale and an upper bound on the replenishment quantity. We propose solution methods for these two subproblems, each of which stands alone as practical problems, and utilize these methods to optimally solve the buyer's replenishment problem.

Keywords: Premium schedule; Transportation; Cargo capacity; Supplier selection; Newsvendor model (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:140:y:2012:i:1:p:521-529

DOI: 10.1016/j.ijpe.2012.07.003

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