A solution procedure to determine joint pricing and replenishment policy for deteriorating inventory systems with declining market

Abstract

In 1995, Wee extended the existing models to consider the interactions between price, service level and replenishment policy. The inventory deteriorates as a fraction of the onhand inventory and shortages are practically back-ordered. The objective of Wee's study is to maximize profit under the assumption that demand rate is a linear price function and decreases negative exponentially with time. However, in Wee's study, the objective function seems to be inappropriate. The main aim to this paper is to modify Wee's point of view and to propose an appropriate objective function to study. Finally, and accurate and rapid algorithm is presented to solve it.

Key Words:

• Deteriorating inventory
• varying demand
• partial back-ordering