Research On Inventory Issues Under Temporary Price Discount

Inventory management has been an important research field in management science from the beginning of last century, especially after the 1950s. A large mount of research fruit has been gained and put in practice. Because of more tensive market competition and variable demand, more and more items present fluctuating price, among which a formation is temporary price varing. Often the price discount lasts a short time, and is a behavior of price promotion for the provider to achieve stated marketing goal. The existing literatures propose how to determine the superaddition order when the price is discounted through comparing the total costs of superaddition ordering policy and non- superaddition ordering policy. The assumption of permanent working of the company is implied. But, in fact, the calculation of cost savings is based on the infinite horizon, so the special order quantity often magnified.And along with the booming of high technology, most products present more and more short life. To avoid the market risk of excess inventory, many firms make inventory decisions from the long time horizon to short horizon. In other words, the buyer makes a special order when price is discounted. He prefers the single order cost savings than from long time horizon or infinite horizon.The paper starts from classic replenishment models, and then analyzes order policy when the buyer face temporary price discounts, under infinite horizon and finite horizon respectively. The thesis proposes two basic replenishement models after reviewing old literatures. Then we present some other replenishment policy considering different hybrid conditions by introducing temporary price discounts with other backgrounds, such as variable demand rate, stepwise delay in payment.Also, the dissertation figures out that a firm not only focuses on lowering its purchasing cost, but also considering its inventory issue related to retreating from the market. Existing literatures are often assumed that the company makes decisions about inventory under long time or permanent horizon. The dissertation extends traditional research to consider the inventory decision and market decision at the same time. The thesis can be divided by six chapters, more details are the following:The first chapter is the introduction to show the skeleton of the paper. The history of inventory control and management is summarized and we analyze the literartures about inventory. The chapter mostly sums up the existing literatures about inventory issues under variable prices and research directions.After reviewing existing literatures, we introduce the main content of the paper: one part is replenishment policy analysis under multi-cycle condition, such as considering not constant demand rate, payment terms, etc. The other is to consider order policy and market decision about single item under two-echelon supply chain.Chapter two is to analyse order policy under temporary price discount. We propose two replenishment models under infinite horizon and finite horizon respectively.Chapter three is to consider order policy under variable demand rate and temporary discount. The discounted price is not constant and demand rate is the function of price or is related to inventory on hand. Chapter four is to propose order policy under delay in payment and temporary price discount.Chapter five is about order and retreating from the market policy of single-period commodity under two-echelon supply chain. And the last chapter is to summarize the paper, and the thesis discusses some challenging topics which deserve further research in future.Main contributions of this thesis are briefly summarized as follows:(1) Approximate ordering policy is proposed when the buyer faces temporary price discount of the item. Different from connotative assumption of traditional research, which a firm has a long-time or infinite horizon behavior of cooperation operations, the thesis focuses on the optimization of the total cost of single special order at the price discounted. The existing literatures under infinite horizon have a divergence on the use of the Cesaro limit. And the literatures under finite horizon use the cost of benchmark to gain the optimal special order, which in fact the standard of cost is under infinite horizon. So at the end of the finite horizon the inventory remained, which makes the calculation of the total cost is not precise. The theis just considers the maximization of cost saving of single special order under infinite horizon and proposes equal replenishment after single special order use out under finite horizon, then at the end of the horizon the inventory is zero.(2) Considering the purchasing cost of one item as benchmark, the thesis presents some new inventory models to calculate the special order under variable demand rate, which is the function of the price. By introducing stepwise payment terms, the thesis analyzes how to calculate the special order quantity when the buyer faces to temporary price discounts. And the paper proposes how to make a delay in payment terms for the provider, when he knows the parameters of the buyer.(3) When the firm orders large amounts of product in a short time, and also he can sell its inventory to other firms to retreat from existing marketplace, how does he make his ordering policy and price his inventory. And the similar decisions should be made by his lower firm. The thesis considers their decision making about order and pricing policy under two-echelon supply chain under different conditions.