Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 177, Issue 2, Pages 982-994Publisher
ELSEVIER
DOI: 10.1016/j.ejor.2006.01.034
Keywords
logistics; optimization; supply chain management; quantity discount model
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Owing to the difficulty of treating nonlinear functions, many supply chain management (SCM) models assume that the average prices of materials, production, transportation, and inventory are constant. This assumption, however, is not practical. Vendors usually offer quantity discounts to encourage the buyers to order more, and the producer intends to discount the unit production cost if the amount of production is large. This study solves a nonlinear SCM model capable of treating various quantity discount functions simultaneously, including linear, single breakpoint, step, and multiple breakpoint functions. By utilizing the presented linearization techniques, such a nonlinear model is approximated to a linear mixed 0-1 program solvable to obtain a global optimum. (c) 2006 Elsevier B.V. All rights reserved.
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