Combined Pricing and Inventory Control with Multiple Unreliable Suppliers

Abstract

We study a general finite horizon, periodic review combined inventory and pricing model with N suppliers and T periods, where both the demands and the supply mechanisms are random. The random supply mechanisms are of a general type that includes most structures encountered in practice. Demands are price dependent according to general, stochastic demand functions. We characterize the optimal combined pricing and ordering policies to all N suppliers. The general results pertain to general independent supply mechanisms. Under random capacities -- one of the special random supply mechanisms -- they also extend to suppliers that are positively dependent on each other.

Keywords: combined pricing and inventory control, general supply functions, multiple suppliers, individual threshold policies, monotone prices