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Dynamic decision-making for an inventory system with time-varying demand

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  • Yu-Chung Tsao
  • Lu-Wen Liao
  • Pi-Chuan Sun

Abstract

This article considers the problem of dynamic decision-making for time-varying demand products under trade credit. The article adopts a price, warranty length and time-dependent demand function to model the finite time horizon inventory. The objective of this study is to determine the optimal periodic selling price, warranty length and ordering quantity so that the total profit is maximized. We discuss the optimization properties and develop solution procedures based on dynamic programming techniques for solving the problem described. The numerical analyses show that dynamic decision-making is superior to fixed decision-making and an appropriate warranty policy can benefit the company. This study also discusses the effects of interest earned, interest charged and credit period on company's decisions and profits.

Suggested Citation

  • Yu-Chung Tsao & Lu-Wen Liao & Pi-Chuan Sun, 2013. "Dynamic decision-making for an inventory system with time-varying demand," Mathematical and Computer Modelling of Dynamical Systems, Taylor & Francis Journals, vol. 19(5), pages 401-416.
    • Handle: RePEc:taf:nmcmxx:v:19:y:2013:i:5:p:401-416
    DOI: 10.1080/13873954.2013.777747
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