Optimizing differential return on investment pricing, lotsizing and shipment in a two-echelon supply chain

In spite of studies, investigating differential pricing and lotsizing problems in inventory- marketing models individually, this paper addresses them simultaneously aiming to maximize return on inventory investment. A two echelon supply chain is studied that involves a retailer who faces demand from two or more market segments and enable to set different prices and marketing expenditures and a supplier who desires to find optimal number of shipments through an integrated system. A new fractional mixed-integer non-linear programming model is developed to determine optimal ordering, shipping and differential pricing and marketing expenditure quantities simultaneously. A simulated annealing algorithm is also applied to solve the resultant non-linear model. The parameters of the devised SA are calibrated via Taguchi method.

Keywords:

Optimization , Differential pricing , Supply chain , Return on inventory investment , Fractional programming