Purchasing and Selling Strategies of Two Substitutable Products Under Cost Uncertainties
Date Issued
2010
Date
2010
Author(s)
Kuo, Chan-Chih
Abstract
The research is from the aspect of a manufacturer who produces two levels of end products in a DRAM(Dynamic Random Access Memory) supply chain, to consider the uncertainty of material price and the random demand of products, and hence to optimize the material purchase and marketing decision strategy. The two levels of products can satisfy their own demand; also, the higher level products can substitute the lower level products when there is a lower level product shortage.
Dynamic programming is used here to develop the model. We divide the planning horizon into finite intervals, and find the solutions by programming the model in Microsoft Visual Basic. The results include purchasing strategies under pricing uncertainty, timing to apply substitution selling, and profit comparison between with and without substitution selling. Last, the suggestions for manufacturers when facing quantity discount contracts offered by material suppliers.
Subjects
dynamic programming
revenue management
dynamic pricing
supply chain
quantity discount contracts
Type
thesis
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