Jointly pricing and ordering for a multi-product multi-constraint newsvendor problem with supplier quantity discounts

• Published in: Applied mathematical modelling Vol. 35; no. 6; pp. 3001 - 3011
• Main Authors: Shi, Jianmai, Zhang, Guoqing, Sha, Jichang
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Inc 01.06.2011; Elsevier
• Subjects: Applied sciences; Computation; Decision theory. Utility theory; Discount; Discounts; Exact sciences and technology; Heuristic methods; Inventory control, production control. Distribution; Logistics; Mathematical models; Newsvendor; Operational research and scientific management; Operational research. Management science; Order disorder; Ordering; Pricing; Programming; Suppliers; Supply chain; Supply chain; Ordering; Discount; Newsvendor; Pricing; Used machinery; Lagrangian; Decision making; Newsboy problem; Multiple production; Modeling; Gross domestic product; Selling price; Quantity discount; Retailers; Disjunctive programming; Heuristic method; Profit; Capacity constraint; By product; Logistics
• ISSN: 0307-904X
• DOI: 10.1016/j.apm.2010.12.018

We present an extension to the multi-product newsvendor problem by incorporating the retailer’s pricing decision as well as considering supplier quantity discount. The objective is to maximize the expected profit of the retailer through jointly determining the ordering quantities and selling prices for the products, subject to multiple capacity constraints. We formulate the problem as a Generalized Disjunctive Programming (GDP) model and develop a Lagrangian heuristic approach for its solution. Randomly produced instances involving up to 1000 products are used to test the proposed approach. Computational results show that the Lagrangian heuristic approach can present very good solutions to all instances in reasonable time.