Fertilizer Pricing Strategies Under Uncertain Demand

Abstract

Product substitution has long been perceived as one of the most important responses to the case of production shortage. All items in the same category are substituted for each other whenever any of them is unavailable to satisfy the customers’ demand. A wide range of businesses has applied this policy. The purpose of this study is to design a mixed-integer linear programming model to maximize the generated profit. In this study, the mathematical model developed mainly discusses the problem of product substitution in case demand is unknown. The model is set up on the basis of demand, price, and resource capacity. The model is examined under the data provided by P.M fertilizer plant. The results returned by the model include the resource assignment, the quantity of each product to be manufactured at each assigned station, and the proposed unit selling price at a single point of time.