Volume 55, Number 5, September-October 2021
|Page(s)||2685 - 2709|
|Published online||20 September 2021|
Pricing and inventory control decisions in the stochastic hybrid production systems with multiple recovery options
Department of Industrial Engineering, Faculty of Engineering, Alzahra University, Tehran, Iran
2 Department of Industrial Engineering, Faculty of Engineering, Payame Noor University (PNU), P.O. Box 19395-3697, Tehran, Iran
* Corresponding author: firstname.lastname@example.org
Accepted: 29 July 2021
Although pricing and inventory control are crucial decisions in each production system, these decisions are usually investigated separately. This paper considers pricing and inventory control decisions simultaneously in a hybrid production system. The hybrid production system has two recovery options, remanufacturing and refurbishing sites. The demand follows Poisson distribution, which depends on the sale price of each product. Returned products arrive according to a Poisson process. Each returned product can be remanufactured, refurbished, or disposed. The time to manufacturing, refurbishing, and remanufacturing a product also follows an exponential distribution. By modeling the system as a Markov chain, the long-run expected profit function is obtained in terms of the dispose-down-to level of returned products and the order-up-to level and the sale price of serviceable products. A three-dimensional state space of the Markov Chain dependent to the sale price is developed considering pricing and inventory control decisions simultaneously with remanufacturing and refurbishing returned products. Since the model is a mixed integer nonlinear programming and known as complex models, the Artificial Bee Colony (ABC) algorithm, simulation and complete search method are used to solve the problem. The results show that by increasing the purchase price of the returned products, the amount of returned products will increase. If the refurbishing cost of the returned products is high or the disposal cost is low, less inventory should be kept in the system with a high price of serviceable products. If the lost sale cost is high, the more inventory should be maintained. Moreover, by decreasing the price elasticity of demand, the customer’s demand increases, and then more inventory should be maintained in the system.
Mathematics Subject Classification: 91G30
Key words: Hybrid production system / pricing / ABC algorithm / base stock
© The authors. Published by EDP Sciences, ROADEF, SMAI 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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