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Combined pricing and supply chain operations under price-dependent stochastic demand. (English) Zbl 1427.90050
Summary: In this study, we determined product prices and designed an integrated supply chain operations plan that maximized a manufacturer’s expected profit. The computational results of this study revealed that as the variance of the demand distribution increases, a manufacturer will increase its inventory to levels that are greater than the anticipated demand to prevent the potential loss of sales and will simultaneously raise product prices to obtain a greater profit. In the cost minimization approach, the manufacturer may earn the highest possible profits, as determined by the profit optimization approach, only if this firm precisely forecasts the mean market demand for its products. Greater inaccuracies in this forecast will produce lower levels of expected profit.

MSC:
90B06 Transportation, logistics and supply chain management
90B15 Stochastic network models in operations research
90C15 Stochastic programming
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