Technical Note: A Joint Pricing, Supplier Selection, and Inventory Replenishment Model Using the Logit Demand Function

ABSTRACT We revisit the joint pricing, supplier selection, and inventory replenishment problem for a single item in a two‐stage system examined by Adeinat and Ventura (2015) and use the logit function to model the price‐sensitive demand. This article provides a detailed analysis regarding the shape...

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Bibliographic Details
Published in:Decision sciences 2021-04, Vol.52 (2), p.512-534
Main Authors: Duan, Lisha, Ventura, José A.
Format: Article
Language:English
Subjects:
Analysis
and Supplier Selection
College teachers
Component and supplier management
Demand
Demand curves
Inventory control
Inventory Replenishment
Justification
Logistics
Logit Function
Management science
Mathematical analysis
Price‐Sensitive Demand
Pricing
Replenishment
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Summary:ABSTRACT We revisit the joint pricing, supplier selection, and inventory replenishment problem for a single item in a two‐stage system examined by Adeinat and Ventura (2015) and use the logit function to model the price‐sensitive demand. This article provides a detailed analysis regarding the shape and properties of the logit demand function. In this context, we propose a two‐stage piecewise‐linear approximation technique to solve the integrated pricing, supplier selection, and inventory replenishment model. Besides, in this research, we provide sufficient justification for the selection of the logit demand function as well as a comparison with other demand functions. A numerical study further suggests the importance of using a precise demand curve to select the set of suppliers, coordinate inventory, and accurately optimize the profit function.
ISSN:0011-7315
1540-5915
DOI:10.1111/deci.12441