| Article ID: | iaor20172737 |
| Volume: | 254 |
| Issue: | 1 |
| Start Page Number: | 165 |
| End Page Number: | 190 |
| Publication Date: | Jul 2017 |
| Journal: | Annals of Operations Research |
| Authors: | Crdenas-Barrn Leopoldo, Tiwari Sunil, Mishra Umakanta, Shaikh Ali, Trevio-Garza Gerardo |
| Keywords: | demand, inventory: order policies, simulation, combinatorial optimization, retailing |
This paper develops an EOQ inventory model that considers the demand rate as a function of stock and selling price. Shortages are permitted and two cases are studied: (i) complete backordering and (ii) partial backordering. The inventory model is for a deteriorating seasonal product. The product’s deterioration rate is controlled by investing in the preservation technology. The main purpose of the inventory model is to determine the optimum selling price, ordering frequency and preservation technology investment that maximizes the total profit. Additionally, the paper proves that the total profit is a concave function of selling price, ordering frequency and preservation technology investment. Therefore, a simple algorithm is proposed to obtain the optimal values for the decision variables. Several numerical examples are solved and studied along with a sensitivity analysis.