An inventory model under price and stock dependent demand for controllable deterioration rate with shortages and preservation technology investment
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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.
KeywordsControllable deterioration rate Price and stock dependent demand Preservation technology investment
Mathematics Subject Classification90B05
The authors are thankful to the valuable, constructive and detailed suggestions provided by three anonymous referees. The second author was supported by the Tecnológico de Monterrey Research Group in Industrial Engineering and Numerical Methods 0822B01006. The third author is grateful to his parents, wife, children Aditi Tiwari and Aditya Tiwari for their valuable support during the development of this paper.
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