Retailer’s Pricing and Lot Sizing Policy for Non Deteriorating Items with Constant Demand Rate Under the Condition of Permissible Delay in Payments

This study develops an EOQ model for retailer’s price and lot size simultaneously when the supplier permits delay in payments for an order of a product whose demand rate is a constant price elastic function for non-deteriorating items. In this study, mathematical models have been discussed under two different situations, i.e., case I: The credit period is less than or equal to cycle time for setting the account; and case II: The credit period is greater than the cycle time for setting the account. Expressions for an inventory system’s net profit are derived for these two cases. The authors develop algorithm for a retailer to determine its optimal price and lot size simultaneously, when supplier offers a permissible in payments.

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

Management Theories and Strategic Practices for Decision Making ◽

10.4018/978-1-4666-2473-3.ch010 ◽

2012 ◽

pp. 170-185

Author(s):

Chandra K. Jaggi ◽

Satish K. Goel ◽

Mandeep Mittal

Keyword(s):

Planning Horizon ◽

Deteriorating Items ◽

Sensitivity Analyses ◽

Selling Price ◽

Discounted Cash Flow ◽

Permissible Delay In Payments ◽

Ordering Policy ◽

Demand Rate ◽

Delay In Payments ◽

Almost All

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.

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

International Journal of Strategic Decision Sciences ◽

10.4018/jsds.2011040102 ◽

2011 ◽

Vol 2 (2) ◽

pp. 20-35 ◽

Cited By ~ 9

Author(s):

Chandra K. Jaggi ◽

Satish K. Goel ◽

Mandeep Mittal

Keyword(s):

Planning Horizon ◽

Deteriorating Items ◽

Sensitivity Analyses ◽

Selling Price ◽

Discounted Cash Flow ◽

Permissible Delay In Payments ◽

Demand Rate ◽

Delay In Payments ◽

Almost All ◽

The Impact

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.

Download Full-text