Inventory and pricing decisions for imperfect quality items with inspection errors, sales returns, and partial backorders under inflation

Aditi Khanna, Aakanksha Kishore, Biswajit Sarkar, Chandra K. Jaggi

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

In this paper, an optimal replenishment inventory policy for imperfect quality items is presented with a selling price-dependent demand under inflationary conditions using a discounted cash flow (DCF) approach. Due to the presence of defectives in the system, all items go through a 100% inspection process. However, the screening process is also considered to be imperfect and involves errors, namely Type-I and Type-II. In addition, shortages are allowed and are partially backlogged. An optimal solution for the proposed model is derived by maximizing the expected profit function by jointly optimizing three decision variables: selling price, order quantity, and backorder level. To validate the theoretical results, a numerical example along with comprehensive sensitivity analysis is offered. The model has pertinence in industries like textiles, electronics, furniture, footwear, automobiles, and plastics.

Original languageEnglish
Pages (from-to)287-306
Number of pages20
JournalRAIRO - Operations Research
Volume54
Issue number1
DOIs
Publication statusPublished - 2020 Jan 1

All Science Journal Classification (ASJC) codes

  • Theoretical Computer Science
  • Computer Science Applications
  • Management Science and Operations Research

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