An inventory model under price and stock dependent demand for controllable deterioration rate with shortages and preservation technology investment

Umakanta Mishra, Leopoldo Eduardo Cárdenas-Barrón*, Sunil Tiwari, Ali Akbar Shaikh, Gerardo Treviño-Garza

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

154 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)165-190
Number of pages26
JournalAnnals of Operations Research
Volume254
Issue number1-2
DOIs
Publication statusPublished - 1 Jul 2017

Bibliographical note

Publisher Copyright:
© 2017, Springer Science+Business Media New York.

Keywords

  • Controllable deterioration rate
  • Preservation technology investment
  • Price and stock dependent demand

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