JOINT PRICING AND REPLENISHMENT POLICY FOR DETERIORATING INVENTORY WITH DECLINING MARKET

This study deals with a deteriorating inventory model where demand dec reases linearly with time and cost of items. Planning horizon is assum ed to be finite, the replenishment cycles are constant and shortages a re partially back-ordered. The net profit maximizing ordering policy a nd price are determined for different degree of partial back-ordering. The reduction in revenue resulted from lost sale is expressed in the lost sale shortage penalty in the total cost formulation. A solution m ethod based on nonlinear programming code and the Hessian matrix guara ntees global optimality of the solution. A numerical example is provid ed to illustrate the theory.