Department of Economics and Business Economics

Joint inventory control and pricing in a service-inventory system

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Joint inventory control and pricing in a service-inventory system. / Marand, Ata Jalili; Li, Hongyan Jenny; Thorstenson, Anders.

In: International Journal of Production Economics, Vol. 209, No. March, 2019, p. 78-91.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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Marand, Ata Jalili ; Li, Hongyan Jenny ; Thorstenson, Anders. / Joint inventory control and pricing in a service-inventory system. In: International Journal of Production Economics. 2019 ; Vol. 209, No. March. pp. 78-91.

Bibtex

@article{c32c1c1631d546609f402ef9929b984e,
title = "Joint inventory control and pricing in a service-inventory system",
abstract = "This study addresses joint inventory control and pricing decisions for a service-inventory system. In such a system both an on-hand inventory item and a positive service time are required to fulfill customer demands. The service-inventory system also captures main features of the classical inventory systems with a positive processing time, e.g., make-to-order systems. In this study, the service-inventory system is modeled as an M/M/1 queue in which the customer arrival rate is price dependent. The inventory of an individual item is continuously reviewed under an (r,Q) policy. The replenishment lead times of the inventory are exponentially distributed. Furthermore, customers arriving during stock-out periods are lost. The stochastic customer inter-arrival times, service times, and inventory replenishment lead times cause the high complexity of the problem and the difficulty in solving it. The aim of this study is to formulate the problem and solve it to optimality. We make three main contributions: (1) We integrate inventory control and pricing in the service-inventory system. The problem is formulated and analyzed as a fractional programming problem, and structural properties are explored for the model. (2) Two solution algorithms are proposed. The first one provides optimal solutions, while the second one is more efficient. (3) The impact of the integrated inventory control and pricing decisions on the overall system performance is investigated. We compare the solutions of the models both with and without fill-rate and service-reliability constraints and report the main interesting managerial insights.",
keywords = "Service-inventory system, Inventory control, Pricing, Operations-marketing interface",
author = "Marand, {Ata Jalili} and Li, {Hongyan Jenny} and Anders Thorstenson",
year = "2019",
doi = "10.1016/j.ijpe.2017.07.008",
language = "English",
volume = "209",
pages = "78--91",
journal = "International Journal of Production Economics",
issn = "0925-5273",
publisher = "Elsevier BV",
number = "March",

}

RIS

TY - JOUR

T1 - Joint inventory control and pricing in a service-inventory system

AU - Marand, Ata Jalili

AU - Li, Hongyan Jenny

AU - Thorstenson, Anders

PY - 2019

Y1 - 2019

N2 - This study addresses joint inventory control and pricing decisions for a service-inventory system. In such a system both an on-hand inventory item and a positive service time are required to fulfill customer demands. The service-inventory system also captures main features of the classical inventory systems with a positive processing time, e.g., make-to-order systems. In this study, the service-inventory system is modeled as an M/M/1 queue in which the customer arrival rate is price dependent. The inventory of an individual item is continuously reviewed under an (r,Q) policy. The replenishment lead times of the inventory are exponentially distributed. Furthermore, customers arriving during stock-out periods are lost. The stochastic customer inter-arrival times, service times, and inventory replenishment lead times cause the high complexity of the problem and the difficulty in solving it. The aim of this study is to formulate the problem and solve it to optimality. We make three main contributions: (1) We integrate inventory control and pricing in the service-inventory system. The problem is formulated and analyzed as a fractional programming problem, and structural properties are explored for the model. (2) Two solution algorithms are proposed. The first one provides optimal solutions, while the second one is more efficient. (3) The impact of the integrated inventory control and pricing decisions on the overall system performance is investigated. We compare the solutions of the models both with and without fill-rate and service-reliability constraints and report the main interesting managerial insights.

AB - This study addresses joint inventory control and pricing decisions for a service-inventory system. In such a system both an on-hand inventory item and a positive service time are required to fulfill customer demands. The service-inventory system also captures main features of the classical inventory systems with a positive processing time, e.g., make-to-order systems. In this study, the service-inventory system is modeled as an M/M/1 queue in which the customer arrival rate is price dependent. The inventory of an individual item is continuously reviewed under an (r,Q) policy. The replenishment lead times of the inventory are exponentially distributed. Furthermore, customers arriving during stock-out periods are lost. The stochastic customer inter-arrival times, service times, and inventory replenishment lead times cause the high complexity of the problem and the difficulty in solving it. The aim of this study is to formulate the problem and solve it to optimality. We make three main contributions: (1) We integrate inventory control and pricing in the service-inventory system. The problem is formulated and analyzed as a fractional programming problem, and structural properties are explored for the model. (2) Two solution algorithms are proposed. The first one provides optimal solutions, while the second one is more efficient. (3) The impact of the integrated inventory control and pricing decisions on the overall system performance is investigated. We compare the solutions of the models both with and without fill-rate and service-reliability constraints and report the main interesting managerial insights.

KW - Service-inventory system

KW - Inventory control

KW - Pricing

KW - Operations-marketing interface

UR - http://www.scopus.com/inward/record.url?scp=85028332748&partnerID=8YFLogxK

U2 - 10.1016/j.ijpe.2017.07.008

DO - 10.1016/j.ijpe.2017.07.008

M3 - Journal article

VL - 209

SP - 78

EP - 91

JO - International Journal of Production Economics

JF - International Journal of Production Economics

SN - 0925-5273

IS - March

ER -