Abstract
In this paper, we study the joint pricing and inventory replenishment problem for a periodic-review inventory system with random demand and dual suppliers, one of the suppliers is reliable but more expensive, the other supplier is less expensive but is unreliable with random yield. We characterize the firm’s optimal policies that simultaneously determine the optimal ordering and pricing decisions in each period over a finite planning horizon, and investigate the impacts of supply source diversification and supplier reliability on the firm and on its customers. We show that having source diversification or higher reliability of suppliers not only increases the firm’s expected profit, but also results in a lower optimal selling price, thus they benefit both the firm and its customers.
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Acknowledgment
The authors are grateful to two anonymous referees for their constructive comments and suggestions. In particular, the study on the case with correlated supply yield and demand was suggested by a reviewer. The research of Xiuli Chao is supported by NSF under CMMI-0927631 and CMMI-1131249. The research of Xiting Gong is supported in part by CUHK Direct Grant under No. 4055022. The research of Shaohui Zheng is supported by Hong Kong Research Grants Council under Grants #647611 and #645212, and by National Natural Science Foundation of China under Grant #71131003.
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Chao, X., Gong, X. & Zheng, S. Optimal pricing and inventory policies with reliable and random-yield suppliers: characterization and comparison. Ann Oper Res 241, 35–51 (2016). https://doi.org/10.1007/s10479-014-1547-0
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DOI: https://doi.org/10.1007/s10479-014-1547-0