Procurement strategies for lost-sales inventory systems with all-units discounts

Huihui Wang, Yimin Yu, Wei Zhang and Zhongsheng Hua

European Journal of Operational Research, 2019, vol. 272, issue 2, 539-548

Abstract: Despite the prevalence of all-units discounts in procurement contracts, these discounts pose a technical challenge to analyze procurement strategies due to neither concave nor convex ordering costs. In this paper, we consider the optimal procurement strategies with all-units discounts under the lost-sales setting. By assuming log-concave demands, we find that the optimal procurement strategies have a generalized Q-jump (s, S) structure by introducing a new notion of Q-jump single-crossing. In particular, a sufficient condition is provided for degenerating the optimal procurement strategies from a generalized Q-jump (s, S) structure into a Q-jump (s, S) structure, which is definitely optimal for the single-period problem. Extensive numerical results suggest that the Q-jump (s, S) policy as a heuristic performs considerably well when its optimality sufficient condition is violated. Our results can be extended to systems with multi-break all-units discounts, and systems with all-units discounts on batch ordering.

Keywords: Inventory; Procurement strategy; All-units discounts; Quasi-convexity; Q-jump single-crossing (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:272:y:2019:i:2:p:539-548

DOI: 10.1016/j.ejor.2018.06.053

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