Mathematical Problems in Engineering
Volume 2009 (2009), Article ID 932676, 15 pages
doi:10.1155/2009/932676
Research Article

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

Neale R. Smith,1 Jorge Limón Robles,1 and Leopoldo Eduardo Cárdenas-Barrón2,3

1School of Engineering, Center for Quality and Manufacturing, Monterrey Institute of Technology, Monterrey, Mexico
2Industrial and Systems Engineering Department, School of Engineering, Monterrey Institute of Technology, Monterrey, Mexico
3Management Department, School of Business, Monterrey Institute of Technology, Monterrey, Mexico

Received 24 January 2009; Revised 7 May 2009; Accepted 23 June 2009

Academic Editor: Wei-Chiang Hong

Copyright © 2009 Neale R. Smith et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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.