Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/9683
Title: Optimal order lot sizing and pricing with free shipping
Authors: Hua, G
Wang, S
Cheng, TCE 
Keywords: Free shipping
Inventory
Logistics
Pricing
Purchasing
Issue Date: 2012
Publisher: Elsevier
Source: European journal of operational research, 2012, v. 218, no. 2, p. 435-441 How to cite?
Journal: European journal of operational research 
Abstract: Companies, especially those in e-business, are increasingly offering free shipping to buyers whose order sizes exceed the free shipping quantity. In this paper, given that the supplier offers free shipping, we determine the retailer's optimal order lot size and the optimal retail price. We explicitly incorporate the supplier's quantity discount, and transportation cost into the model. We analytically and numerically examine the impacts of free shipping, quantity discount and transportation cost on the retailer's optimal lot sizing and pricing decisions. We find that free shipping can benefit the supplier, the retailer, and the end customers, and can effectively encourage the retailer to order more of the good, to the extent of ordering a few times of the optimal order lot size without free shipping. The order lot size will increase and the retail price will decrease if the supplier offers proper free shipping.
URI: http://hdl.handle.net/10397/9683
ISSN: 0377-2217
EISSN: 1872-6860
DOI: 10.1016/j.ejor.2011.11.024
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