A particle swarm optimization for solving joint pricing and lot-sizing problem with fluctuating demand and trade credit financing

Pricing is a major strategy for a retailer to obtain its maximum profit. Furthermore, under most market behaviors, one can easily find that a vendor provides a credit period (for example 30 days) for buyers to stimulate the demand, boost market share or decrease inventories of certain items. Therefore, in this paper, we establish a deterministic economic order quantity model for a retailer to determine its optimal selling price, replenishment number and replenishment schedule with fluctuating demand under two levels of trade credit policy. A particle swarm optimization is coded and used to solve the mixed-integer nonlinear programming problem by employing the properties derived in this paper. Some numerical examples are used to illustrate the features of the proposed model.

Research highlights► Studied a deteriorating inventory system with fluctuating demand and trade credit financing. ► PSO is coded and used to solve the problem by employing the properties derived from this paper. ► The computational results indicated that the PSO algorithm offers acceptable efficiency and accurate search capability.