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January  2010, 6(1): 123-147. doi: 10.3934/jimo.2010.6.123

Joint pricing and production planning for fixed priced multiple products with backorders

Lou Caccetta 1, and  Elham Mardaneh 1,

1. 

Western Australian Centre for Excellence in Industrial Optimisation, Department of Mathematics and Statistics, Curtin University of Technology, GPO Box U1987, WA, 6845, Australia, Australia

Received  March 2009 Revised  August 2009 Published  November 2009

In this paper, we present a multiperiod model for production planning in a make-to-stock manufacturing system with constant pricing. We consider a multiproduct capacitated setting and introduce a demand-based model where the demand is a function of the price. There is an assumption that the production setup costs are negligible. A key part of the model is that backorders are allowed. As a result of this, the problem becomes a non linear programming problem with the nonlinearities in both the objective function and some constraints. We develop an algorithm that computes the global optimal production and pricing policy on a finite time horizon. We illustrate the application of the algorithm through a detailed numerical example.
Keywords: Pricing, Production Planning, Coordination of Marketing and Operations Decisions..
Mathematics Subject Classification: Primary: 90B30, 80M50; Secondary: 90B5.
Citation: Lou Caccetta, Elham Mardaneh. Joint pricing and production planning for fixed priced multiple products with backorders. Journal of Industrial and Management Optimization, 2010, 6 (1) : 123-147. doi: 10.3934/jimo.2010.6.123
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