Optimal Pricing and Production Master Planning in a Multiperiod Horizon Considering Capacity and Inventory Constraints

Abstract

We formulate and solve a single‐item joint pricing and master planning optimization problem with capacity and inventory constrains. The objective is to maximize profits over a discrete‐time multiperiod horizon. The solution process consists of two steps. First, we solve the single‐period problem exactly. Second, using the exact solution of the single‐period problem, we solve the multiperiod problem using a dynamic programming approach. The solution process and the importance of considering both capacity and inventory constraints are illustrated with numerical examples.

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