Inventory and pricing decisions for imperfect quality items with inspection errors, sales returns, and partial backorders under inflation

In this paper, an optimal replenishment inventory policy for imperfect quality items is presented with a selling price-dependent demand under inflationary conditions using a discounted cash flow (DCF) approach. Due to the presence of defectives in the system, all items go through a 100% inspection p...

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Bibliographic Details
Published inR.A.I.R.O. Recherche opérationnelle Vol. 54; no. 1; pp. 287 - 306
Main Authors Khanna, Aditi, Kishore, Aakanksha, Sarkar, Biswajit, Jaggi, Chandra K.
Format Journal Article
LanguageEnglish
Published Paris EDP Sciences 01.01.2020
Subjects
Backorders
Discounted cash flow
Inspection
Inventory
Optimization
Order quantity
Polymers
Replenishment
Sensitivity analysis
Textiles
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Summary:In this paper, an optimal replenishment inventory policy for imperfect quality items is presented with a selling price-dependent demand under inflationary conditions using a discounted cash flow (DCF) approach. Due to the presence of defectives in the system, all items go through a 100% inspection process. However, the screening process is also considered to be imperfect and involves errors, namely Type-I and Type-II. In addition, shortages are allowed and are partially backlogged. An optimal solution for the proposed model is derived by maximizing the expected profit function by jointly optimizing three decision variables: selling price, order quantity, and backorder level. To validate the theoretical results, a numerical example along with comprehensive sensitivity analysis is offered. The model has pertinence in industries like textiles, electronics, furniture, footwear, automobiles, and plastics.
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content type line 14
ISSN:0399-0559
1290-3868
DOI:10.1051/ro/2018102