Optimal decision of components ordering for two kinds of substitutable and perishable products

This paper investigates the optimal decision of components ordering for a dealer who assembles and sells the two kinds of substitutable and perishable products. In the case of uncertain product demand, when the dealer encounter old product out of stock, they can use the hybrid product or the new product to meet the demand of the old product users. A discrete stochastic optimization model, which takes maximizing its expectation of net income as its objective and use satisfaction rate of the customer demands as the stochastic constraints and in which the substitutable strategy, is taken into account, is proposed for the ordering sizes of the two kinds of substitutable and perishable products. Then this paper analyzes the properties of the model with and without the stochastic constraint, proves the existence of the optimal solution by applying the method of marginal analysis and gives the algorithm of finding the optimal solution. Finally, this paper employs some simulated data cases to verify the validity of the algorithm and the method proposed in this paper and puts forward some management insights for the dealer.