In this paper, we provide some useful properties for finding the
optimal replenishment schedule with stock-dependent demand
under exponential partial backlogging. First, no matter that building
up inventory has a positive or negative effect on the profit, in
Theorem 1(a), Theorem 1(c), Theorem 2(c) and Theorem 2(d), we
point out that inventory should be displayed to the maximum
allowable W units in the beginning and established a unique optimal
solution to the problem respectively. Second, when building
up inventory has a negative effect on the profit, in Theorem 2(a)
and Theorem 3(a), we also establish a unique optimal solution to
the problem respectively, and reveal that inventory displayed in
the beginning is less than the shelf space. Third, since decision variables
in our problem cannot be solved by simple algebraic means,
they have to be solved numerically by using Newton–Raphson
Method (or any bisection method). Based on our arguments, in order
to find the optimal t2 and t2 such that Z t2 ¼ 0 and G t2 ¼ 0
respectively, a proper choice of the initial value t2 is very important
due to possible local maxima. Without the right choice of initial value,
for example, taking t2 > ~t2, Newton–Raphson Method fails to produce a solution satisfying the sufficient condition for the maximality
problem of TP(t1, t2)and it will converge to a saddle point.
The proposed model can be extended in several ways. For instance,
we could extend the deterministic demand function to stochastic
demand patterns. The demand could also be generalized as
a function of the price and stock level. Furthermore, we could generalize
the model to allow for permissible delay in payments.