Deterministic ordering policy with price- and stock-dependent demand under fluctuating cost and limited capacity

In this paper, we extend the classical economic order quantity model to allow for the demand rate influenced by both selling price and displayed stock level. A finite period system is considered under inflation for deteriorating items. In addition, we impose a ceiling on the number of on-display stocks. We also allow for shortages and general partial backlogging. The objective is to maximize the discounted total profit by finding the optimal replenishment number, replenishment schedule and selling price changed periodically. An effective search procedure is provided to find the optimal solution by employing the properties derived in this paper and particle swarm optimization algorithm. Several numerical examples are used to illustrate the features of the proposed model.

► The demand rate is assumed to be influenced by both selling price and displayed stock level.
► The inventory problem is solved effectively by employing the particle swarm optimization algorithm.
► We investigate the change of the discounted total profit and the number of replenishments from the sensitivity analysis.