Department of Economics and Business Economics

Synchronisation of customers’ orders using discounts

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  • Viktoryia Buhayenko
  • ,
  • Erik van Eikenhorst, Molde University College, Norway
Conventionally, price discounts are offered to enhance demand, for example to get rid of excess inventory. This paper, however, studies the possibility of using discounts in situations when total demand is non-sensitive to changes in prices. By introducing a discount in some periods, the supplier is able to give his customers the incentive to change their order patterns in a way that minimizes his total cost. With the new order schemes, all parties are at least as well off as before. A mono-objective reformulation for this conflicting bi-objective problem is proposed and a mixed-integer based heuristic is developed for the reformulated problem. The heuristic algorithm is based on a separation between determining the order/set-up pattern and the required discounts. Extensive numerical studies show that the application of the heuristic results in a benefit for the whole supply chain. To increase the supplier's profit a modification of the heuristic which differs in the discount approximation used is developed.
Original languageEnglish
JournalInternational Journal of Systems Science
Pages (from-to)148-162
Number of pages15
Publication statusPublished - 2016

    Research areas

  • Discounts, Heuristics, Mixed-integer programming, Supplier's profit maximization, Dynamic lot-sizing

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