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Inventory and pricing strategies for deteriorating items with limited capacity and time-proportional backlogging rate

Author

Listed:
  • Chandra K. Jaggi
  • K.K. Aggarwal
  • Priyanka Verma

Abstract

In the present study, a two-warehouse deterministic inventory model for deteriorating items with price-sensitive demand is developed. A rented warehouse (RW) is used to store the excess units over the fixed capacity of the own warehouse (OW). In addition, shortages are allowed in the OW and it is assumed that the backlogging demand rate is dependent on the duration of the stock-out. The objective is to find the optimal inventory and pricing strategies maximising the total average profit over the infinite planning horizon. For any given selling price, we first prove that the optimal replenishment schedule not only exists but is unique. Next, we show that the total average profit is a concave function of price when the replenishment schedule is given. The optimal selling price and replenishment schedule is also calculated for the proposed model. Finally, the results have been validated with the help of a numerical example.

Suggested Citation

  • Chandra K. Jaggi & K.K. Aggarwal & Priyanka Verma, 2010. "Inventory and pricing strategies for deteriorating items with limited capacity and time-proportional backlogging rate," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 8(3), pages 331-354.
    • Handle: RePEc:ids:ijores:v:8:y:2010:i:3:p:331-354
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    Citations

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    Cited by:

    1. Bhunia, A.K. & Shaikh, Ali Akbar, 2015. "An application of PSO in a two-warehouse inventory model for deteriorating item under permissible delay in payment with different inventory policies," Applied Mathematics and Computation, Elsevier, vol. 256(C), pages 831-850.
    2. Manoranjan De & Barun Das & Manoranjan Maiti, 2016. "EPL models for complementary and substitute items under imperfect production process with promotional cost and selling price dependent demands," OPSEARCH, Springer;Operational Research Society of India, vol. 53(2), pages 259-277, June.
    3. Bhunia, A.K. & Jaggi, Chandra K. & Sharma, Anuj & Sharma, Ritu, 2014. "A two-warehouse inventory model for deteriorating items under permissible delay in payment with partial backlogging," Applied Mathematics and Computation, Elsevier, vol. 232(C), pages 1125-1137.
    4. Mohini Kumari & T. P. M. Pakkala, 2016. "Inventory policy for deteriorating items under trade credit when time of payment is uncertain," OPSEARCH, Springer;Operational Research Society of India, vol. 53(1), pages 178-196, March.
    5. Majumder, P. & Bera, U.K. & Maiti, M., 2016. "An EPQ model for two-warehouse in unremitting release pattern with two-level trade credit period concerning both supplier and retailer," Applied Mathematics and Computation, Elsevier, vol. 274(C), pages 430-458.

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