A nonlinear approach for integrated marketing-economic production quantity problem

Abstract

Pricing is a key activity in determining any firm's profit in a supply chain due to the competitive nature of markets. Consequently, modeling the relation between marketing and manufacturing departments in a manufacturing company in order to come up with optimum decisions is of great importance. In this paper, we analyze a joint marketing-production problem, where the goal is maximizing profit of the company by determining optimal production quantity, marketing expenditure, and unit selling price at a manufacturing company with a finite production rate. The problem is formulated as a multiproduct signomial geometric programming model, which will be transformed into a standard posynomial model through a bi-level stepwise procedure where an optimal solution can be found. The model is illustrated on a numerical example, and some sensitivity analysis is performed.