Optimal pricing and ordering policy for defective items under temporary price reduction with inspection errors and price sensitive demand

Zhu, Gui-Yang

doi:10.3934/jimo.2021060

Cited by 3 publications

(1 citation statement)

References 60 publications

(102 reference statements)

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“…The model accounted for imperfect production at the manufacturer's stage and an inspection process at the retailer's stage that involved Type-I and Type-II errors. Zhu [72] conducted a study on the optimal promotional pricing, special order quantity, and screening rate for defective items at the retailer level in the presence of a temporary price reduction. The study considered both Type-I and Type-II inspection errors as factors to be incorporated into the analysis.…”

Section: ] Gharaei and Almehdawementioning

confidence: 99%

An Inventory Model for Growing Items When the Demand Is Price Sensitive with Imperfect Quality, Inspection Errors, Carbon Emissions, and Planned Backorders

De-la-Cruz-Márquez,

Cárdenas-Barrón,

Porter

et al. 2023

Mathematics

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Inventory models that consider environmental and quality concerns have received some attention in the literature, yet no model developed to date has investigated these features in combination with growing items. Therefore, there is a need to incorporate these three relevant aspects together in a single inventory model to support decisions, compare results, and obtain new knowledge for the complexities of the real world. Moreover, current sustainable inventory management practices aim at mitigating the ecological consequences of an industry while preserving its profitability. The present study aligns with this perspective and introduces an economic order quantity (EOQ) model that considers imperfect quality while also accounting for sustainability principles. More specifically, the model addresses growing items, which have a demand dependent on selling price and the unique ability to grow while being stored in inventory. Additionally, the analysis acknowledges the possibility of classification errors during the inspection process, encompassing both Type-I and Type-II inspection errors. Furthermore, the model permits shortages and ensures that any shortage is completely fulfilled through backorders. The optimization model produces an optimal solution for the proposed model that is derived by optimizing three decision variables: order quantity of newborn items, backordering quantity, and the selling price of perfect items. A numerical example is presented, and the results are discussed. Finally, a sensitivity analysis on variations of parameters such as Type-I and Type-II errors shows that it is advantageous to reduce the percentage of good items that are misclassified as defective (i.e., Type-I error). As there is a direct impact of such errors on sales, it is imperative to address and mitigate this issue. When defective items are mistakenly classified as good Type-II errors, adverse consequences ensue, including a heightened rate of product returns. This, in turn, results in additional costs for the company, such as penalties and diminished customer confidence. Hence, the findings clearly suggest that the presence of Type-I and Type-II errors has a negative effect on the ordering policy and on the total expected profit. Moreover, this work provides a model that can be used with any growing item (including plants), so the decision-maker has the opportunity to analyze a wide variety of scenarios.

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Section: ] Gharaei and Almehdawementioning

confidence: 99%

An Inventory Model for Growing Items When the Demand Is Price Sensitive with Imperfect Quality, Inspection Errors, Carbon Emissions, and Planned Backorders

De-la-Cruz-Márquez,

Cárdenas-Barrón,

Porter

et al. 2023

Mathematics

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Managing a sustainable integrated inventory model for imperfect production process with type one and type two errors

Rizky

Wangsa

Jauhari

et al. 2021

Clean Techn Environ Policy

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Managing a sustainable integrated inventory model for imperfect production process with type one and type two errorsThis study develops a sustainable integrated inventory model for controllable lead time with defective items, errors in inspection, and variable lead-time. The research investigates the effect of controlling lead time and capital investment in the setup cost.We assume that the buyer receives a lot size that may contain some defective items with a known defective probability. The buyer's inspector conducts a 100% quality inspection and may incorrectly classify a non-defective item as a defective item (type one (I) error), or incorrectly classify a defective item as a non-defective item (type two (II) error). The mathematical inventory model considering carbon emission cost is developed, and the solution procedure is designed to derive the optimal solution.Finally, numerical examples and sensitivity analysis are given to illustrate the results.

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Coordination and defect management strategy for a two-level supply chain under price and sales effort-sensitive demand

Dash

Giri

Sarkar

2022

International Journal of Systems Science: Operations & Logi

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Optimal pricing and ordering policy for defective items under temporary price reduction with inspection errors and price sensitive demand

Cited by 3 publications

References 60 publications

An Inventory Model for Growing Items When the Demand Is Price Sensitive with Imperfect Quality, Inspection Errors, Carbon Emissions, and Planned Backorders

An Inventory Model for Growing Items When the Demand Is Price Sensitive with Imperfect Quality, Inspection Errors, Carbon Emissions, and Planned Backorders

Managing a sustainable integrated inventory model for imperfect production process with type one and type two errors

Coordination and defect management strategy for a two-level supply chain under price and sales effort-sensitive demand

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