Optimizing constant pricing and inventory decisions for a periodic review system with batch ordering

Ying Wei ()
Additional contact information
Ying Wei: School of Management, Jinan University

Annals of Operations Research, 2020, vol. 291, issue 1, No 37, 939-957

Abstract: Abstract In business practice the misalignment between frequent inventory adjustments and a sticky price is common. Motivated by Pipi Milk, a diary manufacturer who commits its customer at a fixed price for a whole year meanwhile weekly replenishes its cheese product stock at a specific batch size, this paper develops an integrated constant pricing and inventory control model in a periodic-review system with batch order consideration. For such a system, our focus is on an (nQ, r)-p policy: the price p is determined and committed at the beginning of the planning horizon; inventories are managed based on an (nQ, r) policy with reorder level r and order quantities at non-negative integer multiples of batch size Q. With a fixed ordering cost included, we develop an efficient algorithm to compute the optimal policy parameters with the purpose to maximize the expected long-run average profit. We also numerically investigate the policy performance and verify its advantages by comparing to a sequential optimization of price and inventory decisions. Finally, managerial insights are generated.

Keywords: Joint pricing and inventory model; Constant pricing; Batch order; Stochastic demand (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-018-3057-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:291:y:2020:i:1:d:10.1007_s10479-018-3057-y

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-018-3057-y

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().