Pricing and production lot-size/scheduling with finite capacity for a deteriorating item over a finite horizon

A decision model to solve optimally the production lot-size/scheduling problem taking into account the dynamic aspects of customer's demand and the restriction of finite capacity in a plant was proposed. Both coordinated and decentralized decision-making policies that drive the solution of the multivariate maximization problem was proposed. The procedure of the solution was demonstrated and the comparative study and sensitivity analysis was carried out with respect to major parameters. The result shows that the solution generated by the coordinated policy outperformed the decentralized policy in maximizing the net profit, minimizing inventory investment and storage capacity.