Pricing and Replenishment Policies for Imperfect Quality Deteriorating Items Under Inflation and Permissible Delay in Payments

Chandra K. Jaggi, Satish K. Goel and Mandeep Mittal
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Chandra K. Jaggi: University of Delhi, India
Satish K. Goel: University of Delhi, India
Mandeep Mittal: Amity School of Engineering and Technology, India

International Journal of Strategic Decision Sciences (IJSDS), 2011, vol. 2, issue 2, 20-35

Abstract: Usually it is assumed that all items in a lot are of good quality, but in reality this assumption may not always be pertinent. Thus, the inspection of lots becomes essential in almost all organizations. Moreover, its role becomes more vital when the items are deteriorating in nature. Owing to this fact, this paper investigates the impact of initial inspection on retailer’s pricing and ordering policy for deteriorating items under inflation and permissible delay in payments using discounted cash flow approach over a finite planning horizon. Demand rate is assumed to be a function of selling price. The proposed model jointly optimizes the number of replenishments and price by maximizing the retailer’s total profit. Results have been demonstrated with the help of a numerical example, and sensitivity analyses are also presented to provide managerial insights into practice.

Date: 2011
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