An integrated inventory model involving discrete setup cost reduction, variable safety factor, selling price dependent demand, and investment

• Published in: R.A.I.R.O. Recherche opérationnelle Vol. 53; no. 1; pp. 39 - 57
• Main Authors: Dey, Bikash Koli, Sarkar, Biswajit, Sarkar, Mitali, Pareek, Sarla
• Format: Journal Article
• Language: English
• Published: Paris EDP Sciences 01.01.2019
• Subjects: 90B05; 90B06; Algorithms; Cost reduction; Demand; Discrete setup cost reduction; Inventory; Inventory management; Lead time; Mathematical models; Poisson distributed leadtime; Poisson distribution; Production planning; Safety factors; selling-price-dependent demand; Sensitivity analysis; Shipments; shortage; Stability; Statistical analysis; variable safety factor
• ISSN: 0399-0559; 1290-3868
• DOI: 10.1051/ro/2018009

This paper develops a sustainable integrated inventory model for maximizing profit with a controllable lead time, discrete setup cost reduction, and consideration of environmental issues. Contrary to the available literature, this paper considers a discrete setup cost for the vendor, thus making the integrated model sustainable. The customer’s demand is assumed to be selling-price dependent to increase the number of sales, and the lead time demand follows a Poisson distribution. The integrated model is used to optimized the total shipment number, volume of shipments, safety factor, investments, selling-price, and probability of moving between the “in-control” to “out-of-control” states. An algorithm is developed to obtain the numerical results. Numerical examples and sensitivity analyses are given to illustrate the model.