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In this paper, we investigate the possible effects of a temporary price discount offered by the supplier on the retailer’s replenishment policy under the premise that the capacity of the retailer-owned warehouse is limited. The purpose of this study is to develop a decision process for the retailer, which allows he/she to decide whether to adopt a special or regular order policy during a temporary sales period. For the case where a special order policy is selected, the optimal special order quantity by maximising the total cost saving between special and regular orders is determined. The model is developed when the temporary sales period coincides with one of the following: Furthermore, we present useful results to characterise the optimal solutions. Finally, several numerical examples are given to illustrate the theoretical results, and a sensitivity analysis of the optimal solution with respect to the main parameters is also conducted.

AbstractThis study proposes the stochastic inventory mathematical model for the continuous review inventory systems under simultaneously taking account to the controllable lead time and time value of money. In the model, the shortages are allowed and the total amount of stockout during the stockout period is considered to be a mixture of backorders and lost sales. In this paper, we consider the case of the lead time demand follows a normal distribution, and then use the DCF approach procedure to solve the optimal solution. We also develop an algorithm to obtain the optimal ordering strategy for each case (the lead time demand follows normal distribution or distribution free). Furthermore, for all models proposed in this paper, the effects of parameters are also included.