Abstract
Product deterioration is a common phenomenon and is overlooked in most contemporary research on the newsboy problem. In this study, we have considered product deterioration in a production–inventory newsboy model based on multiple just-in-time (JIT) deliveries. This model is solved by a classical optimization technique for the manufacturer production size, wholesale price, replenishment plan, and retailer order policy using a distribution-free approach. Moreover, in order to improve business and entice more customers, a return policy and a post-sale warranty policy is adopted in the model. Theoretical development and numerical examples are provided to demonstrate the validity of this approach.
Highlights
Demand is considered a crucial attribute in inventory research in the present competitive and transparent business
We propose a two-echelon distribution-free deteriorating production–inventory
We propose a two-echelon distribution-free deteriorating production–inventory model for deteriorating products with imperfect processes
Summary
Demand is considered a crucial attribute in inventory research in the present competitive and transparent business. In order to deal with the uncertain demand problem, a newsboy model which considers the stochastic or exogenous demand is used. For products with stochastic demand, retailers usually adopt newsboy models to determine the optimal ordering decisions. For uncertain demand and high deterioration rate, inventory management has become more difficult for the retailer. We proposed a newsboy model considering product deterioration and uncertain demand. The primary goal of this study is to develop a strategy to derive an optimal production size when the wholesale price is known. Our study considers deteriorating items for the newsboy problem and proposes an integrated retailer–manufacturer inventory model. We derive the optimal wholesale price and production strategies for a newsboy problem model. We incorporate product deterioration into the newsboy problem model.
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