A return-on-inventory-investment maximization model for intermediate firms

In a channel distribution system, the function of an intermediate firm is to purchase products and to sell those purchased products to the public or to other firms. In this paper, for the intermediate firms, an inventory model under return-on-inventory-investment maximization is proposed to determine optimally the quality level, the selling quantity and the purchasing price of a product. The selling price and the supply rate of the product as well as the fixed selling cost are assumed to be power functions of one or more of the decision variables. Under this assumption, the global optimal closed-form solution is derived for the inventory model by utilizing geometric programming techniques. In addition, sensitivity analyses on primal and dual geometric programming problems for the inventory model are presented.