A Mathematical Model for an Inventory Management and Order Quantity Allocation Problem with Nonlinear Quantity Discounts and Nonlinear Price-Dependent Demand

Abstract

This article focuses on solving the order quantity allocation problem for retailers. It considers factors such as quality constraints, nonlinear quantity discounts, and price-dependent demand. By formulating it as a nonlinear maximization problem, the article aims to find the best combination of suppliers and order quantity out of infinite solutions to maximize the retailer’s profit. The main contribution of this research is a new mathematical model that can solve the problem of quality constraint and demand in a single step. This problem is complex due to the number of equations, their nonlinear nature, and the various trade-offs given by the market. Additionally, this research considers demand as output and includes price-dependent demand, which is more realistic for retailers. The proposed model was tested using an example from the recent literature and showed better results than the previously published best solution regarding profit maximization.