Varying Order Sizes for One Time Discount Offer – A Net Present Value Analysis

One of the methods of taking optimal decisions under uncertainty is a probabilistic approach. Under the situation of one-time discount offer with uncertain ending duration, the optimal order sizes need not remain same. The cash flow that occurs at different time point depends on order sizes very much. The optimal order sizes will also depends on probability of discount closes before next replacement. The objective of the paper is to determine an optimal ordering policy when a discounted price is offered over a temporary period and it is for a random duration. The paper discusses the method of finding optimal order quantities and reorder levels to maximize the net present value of the profit. A comparison of policies based on net present value (NPV) concept and with that of the absence of NPV is also studied. A sensitivity analysis based on inventory parameters is carried out