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A note on an economic lot size model for price-dependent demand under quantity and freight discounts

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  • Chang, Hung-Chi

Abstract

In this study, we revisit research contributed by Burwell et al. (1997. International Journal of Production Economics 48, 141–155), where an economic lot size model for price-dependent demand under quantity and freight discounts was proposed. Specifically, for the cases of mixed discounts in which the quantity discounts are either of the incremental or all-units variety and the freight discounts are of the opposite type, we first provide counterexamples to show that adopting the existing algorithm to determine overall optimal lot size and selling price may not achieve the goal of maximizing profit. We then propose an easy to understand computational algorithm to obtain an exact solution.

Suggested Citation

  • Chang, Hung-Chi, 2013. "A note on an economic lot size model for price-dependent demand under quantity and freight discounts," International Journal of Production Economics, Elsevier, vol. 144(1), pages 175-179.
    • Handle: RePEc:eee:proeco:v:144:y:2013:i:1:p:175-179
    DOI: 10.1016/j.ijpe.2013.02.001
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    References listed on IDEAS

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    1. Kim, Young-Joo & Hwang, Hark, 2008. "Incremental discount policy for taxi fare with price-sensitive demand," International Journal of Production Economics, Elsevier, vol. 112(2), pages 895-902, April.
    2. Swenseth, Scott R. & Godfrey, Michael R., 2002. "Incorporating transportation costs into inventory replenishment decisions," International Journal of Production Economics, Elsevier, vol. 77(2), pages 113-130, May.
    3. Hua, Guowei & Wang, Shouyang & Cheng, T.C.E., 2012. "Optimal pricing and order quantity for the newsvendor problem with free shipping," International Journal of Production Economics, Elsevier, vol. 135(1), pages 162-169.
    4. Toptal, Aysegül, 2009. "Replenishment decisions under an all-units discount schedule and stepwise freight costs," European Journal of Operational Research, Elsevier, vol. 198(2), pages 504-510, October.
    5. Burwell, Timothy H. & Dave, Dinesh S. & Fitzpatrick, Kathy E. & Roy, Melvin R., 1997. "Economic lot size model for price-dependent demand under quantity and freight discounts," International Journal of Production Economics, Elsevier, vol. 48(2), pages 141-155, January.
    6. Abad, P. L. & Aggarwal, Vijay, 2005. "Incorporating transport cost in the lot size and pricing decisions with downward sloping demand," International Journal of Production Economics, Elsevier, vol. 95(3), pages 297-305, March.
    7. Toptal, Ayşegül, 2012. "Integration of shipment scheduling decisions for forward and reverse channels in a recoverable item system," International Journal of Production Economics, Elsevier, vol. 140(1), pages 129-137.
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    Cited by:

    1. Avinadav, Tal & Herbon, Avi & Spiegel, Uriel, 2014. "Optimal ordering and pricing policy for demand functions that are separable into price and inventory age," International Journal of Production Economics, Elsevier, vol. 155(C), pages 406-417.
    2. Ata Allah Taleizadeh & Bita Hazarkhani & Ilkyeong Moon, 2020. "Joint pricing and inventory decisions with carbon emission considerations, partial backordering and planned discounts," Annals of Operations Research, Springer, vol. 290(1), pages 95-113, July.
    3. Armando Meza & Paolo Latorre & Milena Bonacic & Héctor López-Ospina & Juan Pérez, 2024. "Optimizing Inventory and Pricing for Substitute Products with Soft Supply Constraints," Mathematics, MDPI, vol. 12(11), pages 1-23, June.
    4. Nistha Kumari & Yogendra Kumar Rajoria & Anand Chauhan & Satya Jeet Singh & Anubhav Pratap Singh & Vineet Kumar Sharma, 2024. "A Supply Chain Coordination Optimization Model with Revenue Sharing and Carbon Awareness," Sustainability, MDPI, vol. 16(9), pages 1-27, April.
    5. Nita H. Shah & Pratik H. Shah & Milan B. Patel, 2021. "Retailer’s inventory decisions with promotional efforts and preservation technology investments when supplier offers quantity discounts," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 1116-1132, December.
    6. Chandan Mahato & Gour Chandra Mahata, 2023. "Optimal Pricing and Inventory Decisions for Perishable Products with Multivariate Demand Function Under Trade Credit," SN Operations Research Forum, Springer, vol. 4(2), pages 1-26, June.
    7. Andriolo, Alessandro & Battini, Daria & Grubbström, Robert W. & Persona, Alessandro & Sgarbossa, Fabio, 2014. "A century of evolution from Harris׳s basic lot size model: Survey and research agenda," International Journal of Production Economics, Elsevier, vol. 155(C), pages 16-38.
    8. McDonald, Conor M., 2016. "Integrating packaging and supply chain decisions: Selection of economic handling unit quantities," International Journal of Production Economics, Elsevier, vol. 180(C), pages 208-221.
    9. Taleizadeh, Ata Allah & Pentico, David W., 2014. "An Economic Order Quantity model with partial backordering and all-units discount," International Journal of Production Economics, Elsevier, vol. 155(C), pages 172-184.

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