Effects of Discount Scenarios on Chaotic Behavior of Inventory Level Under Price-Dependent Demand

Effects of Discount Scenarios on Chaotic Behavior of Inventory Level Under Price-Dependent Demand

Iman Nosoohi (Department of Industrial Engineering& Systems Analysis, Isfahan University of Technology (IUT), Isfahan, Iran) and Jamshid Parvizian (Department of Industrial Engineering& Systems Analysis, Isfahan University of Technology (IUT), Isfahan, Iran)
Copyright: © 2013 |Pages: 15
DOI: 10.4018/ijsda.2013070104
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Abstract

In competitive conditions, demand depends on the price and retailers with lower prices sell more. In this paper a dynamic model is developed in which demand is price-dependent and the price is determined by the retailer based on its inventory level. The retailer can offer discounts to customers, regarding its inventory level, based on different scenarios such as linear, total or increasing scenarios. Simulations show that each scenario has different effects on the long-term chaotic behavior of the inventory level, and is able to control aperiodic behavior of inventory level under specific initial conditions. It is established that in order to secure inventory stability, the discount scenario should consider the incoming shipments to the retailer and the potentially maximum demand, instead of the inventory level.
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Literature Review

In this section, we first review research papers that relate to chaotic behavior of supply chains. Then, we review studies with the assumption of price dependent demand and discount policies.

Several studies have investigated supply chain management through different simulation approaches such as spreadsheet simulation, system dynamics, discrete-event simulation and business games (see for example Ingalls et al., 2005; Jain & Errin, 2005; Kleijnen, 2005; Rong et al., 2008; Kim, 2011). However there are limited studies on simulation of supply chain’s from the view of chaotic behavior.

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