Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case

We analyze a finite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon. We show that when the demand model is additive, the profit-to-go functions are k-concave and hence an (s,S,p) policy is optimal. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period. For more general demand functions, i.e., multiplicative plus additive functions, we demonstrate that the profit-to-go function is not necessarily k-concave and an (s,S,p) policy is not necessarily optimal. We introduce a new concept, the symmetric k-concave functions and apply it to provide a characterization of the optimal policy.

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: the Infinite Horizon Case

We analyze an infinite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are identically distributed random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to maximize expected discounted, or expected average profit over the infinite planning horizon. We show that a stationary (s,S,p) policy is optimal for both the discounted and average profit models with general demand functions. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period.

Inverse Metabolic Engineering of Synechocystis PCC 6803 for Improved Growth Rate and Poly-3-hydroxybutyrate Production

Synechocystis PCC 6803 is a photosynthetic bacterium that has the potential to make bioproducts from carbon dioxide and light. Biochemical production from photosynthetic organisms is attractive because it replaces the typical bioprocessing steps of crop growth, milling, and fermentation, with a one-step photosynthetic process. However, low yields and slow growth rates limit the economic potential of such endeavors. Rational metabolic engineering methods are hindered by limited cellular knowledge and inadequate models of Synechocystis. Instead, inverse metabolic engineering, a scheme based on combinatorial gene searches which does not require detailed cellular models, but can exploit sequence data and existing molecular biological techniques, was used to find genes that (1) improve the production of the biopolymer poly-3-hydroxybutyrate (PHB) and (2) increase the growth rate. A fluorescence activated cell sorting assay was developed to screen for high PHB producing clones. Separately, serial sub-culturing was used to select clones that improve growth rate. Novel gene knock-outs were identified that increase PHB production and others that increase the specific growth rate. These improvements make this system more attractive for industrial use and demonstrate the power of inverse metabolic engineering to identify novel phenotype-associated genes in poorly understood systems.