Abstract

In this study, we analyze the replenishment decision of a buyer with the objective of maximizing total expected profits. the buyer faces stepwise freight costs in inbound transportation and a hybrid wholesale price schedule given by a combination of all-units discounts with economies and diseconomies of scale. This general cost structure enables the model and the proposed solution to be also used for the supplier selection of a buyer under the single sourcing assumption. We show that the buyers replenishment problem reduces to finding and comparing the solutions of the following two subproblems: (i) a replenishment problem involving wholesale prices given by an all-units discount schedule with economies of scale and a lower bound on the replenishment quantity, and (ii) a replenishment problem involving wholesale prices given by an all-units discount schedule with diseconomies of scale and an upper bound on the replenishment quantity. We propose solution methods for these two subproblems, each of which stands alone as practical problems, and utilize these methods to optimally solve the buyer's replenishment problem. © 2012 Elsevier B.V. All rights reserved.

Department(s)

Engineering Management and Systems Engineering

Keywords and Phrases

Cargo capacity; Newsvendor model; Premium schedule; Supplier selection; Transportation

International Standard Serial Number (ISSN)

0925-5273

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2024 Elsevier, All rights reserved.

Publication Date

01 Nov 2012

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