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Optimal pricing and ordering policies for perishable products under advance-cash-credit payment scheme
- Publication Year :
- 2019
- Publisher :
- Heidelberg: Springer, 2019.
-
Abstract
- Recently, market globalization and competition have forced companies to find alternative means to boost sales and revenue. The use of the cash flow is increasingly becoming a viable alternative for managers to improve their company’s profitability in a supply chain. In today’s business transactions, a supplier usually asks a manufacturer to pay via the advance-cash-credit (ACC) payment scheme if the number of goods procured is high. Additionally, product perishability has been considered in an economic production quantity (EPQ) model since it is a real phenomenon. The present work develops an EPQ model for perishable products under the ACC payment scheme. The objective of the proposed model is to determine the optimal selling price and cycle time while maximizing profit under the ACC payment scheme using a discounted cash flow analysis. A nonlinear optimization algorithm is also proposed to solve the problem. In addition, some numerical examples are employed to illustrate the solution approach and show the concavity of the present value of the total annual profit in terms of both selling price and cycle time. The numerical results show that our proposal algorithm could be applied well to solve the problems. In addition, a sensitivity analysis is conducted to obtain some managerial insights. For example, if the impact of advance payment on procurement cost is relatively smaller than that of cash payment, then it is more profitable for the manufacturer to ask for a cash payment than to receive an advance payment and vice versa.
- Subjects :
- 0209 industrial biotechnology
021103 operations research
Present value
Advance payment
Advance-cash-credit payment
media_common.quotation_subject
0211 other engineering and technologies
02 engineering and technology
Economic production quantity
Payment
Industrial and Manufacturing Engineering
Microeconomics
020901 industrial engineering & automation
Inventory model
Product perishability
Cash
ddc:650
ComputingMilieux_COMPUTERSANDSOCIETY
Profitability index
Cash flow
EPQ
Business
Deterioration rate
media_common
Discounted cash flow
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....3bbb183bce61dbe3bfd4fc4e94ac8a16