Optimal inventory and pricing decisions for supply chain management
Chen, Wen, active 2013
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The dissertation contains two major research projects. In the first project, we first study a multi-period inventory planning problem. In each period, the firm under consideration can source from two possibly unreliable suppliers for a price-dependent demand. Our analysis suggests that the optimal procurement policy is neither a simple reorder-point policy nor a complex one without any structure, as previous studies suggest. Instead, we prove the existence of a reorder point for each supplier. No order is placed to that supplier for any inventory level above the reorder point and a positive order is issued to that supplier for almost every inventory level below the reorder point. We characterize conditions under which the optimal policy reveals monotone response to changes in the inventory level. Furthermore, two special cases of our model are examined in detail to demonstrate how our analysis generalizes a number of well-known results in the literature. In the second project, we study a long-run inventory planning problem in which the retailer can replenish inventory and change price adjustment. We establish that it is optimal to change the price from low to high in each replenishment cycle, the optimal order-up-to level may decrease when the ordering cost increases, and fewer customers are served when the unit cost of procurement increases. Additionally, we provide efficient algorithms to compute the optimal stocking and pricing policies.