An EOQ Model With Partial Backlogging And Consumer Preference

With the rapid development of technology and economic, Variance of products, diversity of information and convenience of channels increase the likelihood of customer churn since entering new century. Improving customer satisfaction, fostering customer loyalty and reducing the customer churn rate are the most important ways to develop steadily for Chinese retail enterprise in drastic market environment. Distributor should pay attention to the impaction of partial backlogging on enterprise brand and potential gains, contact with customers directly, understand their preferences and keep customers actively to avoid customer churn in the stock out period. In this paper, the partial backlogging is mainly discussed. Considering the influence of customer waiting time and sale price and based on time preferences and price preferences consumers, we analysis the distributors'ordering and sales policies to reducing customer lost rate and optimal distributors'profit.Based on the theory of inventory management, some domestic and foreign classic papers about the influence factors and functions of partial backlogging are described and some conclusions are drawn to lay the foundation for this paper.It was assumed that consumer is time preference or price preference, the partial backlogging was a focus in this paper. First, a basic EOQ model is generated under backlogging rate related to sale price and consumer waiting time. The example and the parameter's sensitivity analysis illustrate that purchase price and price backlogging factor are important to ordering strategy, but initial demand and the price demand factor have greater influence on sales strategy. To addition, we assumed that the patient period of time preference customer has a floor, but price preference customer has a cap. Two EOQ models were generated. And the parameter's sensitivity analysis illustrates that distributor should take the same ordering and sales policies when the initial demand and the price demand factor change, but take the different policies when the waiting time and price backlogging factor change. Finally, two varieties of backlogging rate were constructed by making use of the speed difference of function convergence, and an EOQ model with backorder was developed under coexisting two kinds of preference consumer. Theoretical analysis shows that the total profit has an optimal solution under certain conditions, and the total profit is a decreasing function of time-sensitive and price-sensitive factor. The example and the parameter's sensitivity analysis illustrate that these factors are important to distributors'ordering and sales policies.