A Study On Raw Material Inventory Decision Of Enterprises With Stochastic Prices

Stochastic purchasing price often takes place in business practice. Because of the complex and changing world economy, the deterministic price becomes less and less practical. As a result, research on the stochastic price models, which because it changes over time, it is more adaptable, and gains more and more attention. It is a useful alternative for enterprises who wish to improve their management levels and enhance their competitiveness. Current research on stochastic inventory model is mostly focused on stochastic demand and stochastic lead time, which creates a more mature theoretical achievement. However, study on stochastic price is still in the initial stage. Therefore, with this paper, stochastic price is examined as a viable supplement to stochastic models, and thereby enriching inventory theory.This paper mainly talks about the raw material inventory decision of a firm with a stochastic price. The raw material inventory is optimized in order to maximize the profit of the firm under different corporate government modes and different market structures, by using the stochastic control theory. The comparative analysis of the firms is carried out under different corperate government modes and different competitive environment. The numerical simulation analysis is given to the mathematical models established at last.Through establishing and solving of the model with the assumptions, this paper obtains not only the quantitative optimal inventory, but also some qualitative propositions.With the stochastic raw material price, the government mode of the firm has a certain influence on the optimal decision. Under the principle-agent mode, the term of the agent has also influence on the optimal decision. It is negative correlation between the optimal decision and the trend and the volatility of the raw material price. It is positive correlation between the optimal decision and the trend and the volatility of the product price. It is negative correlation between the optimal decision and the trend and the volatility of the raw material price. It is positive correlation between the optimal decision and the trend and the volatility of the product price.Comparing the optimal inventory of the agent-principle based firm with that of the family business, we get the results as follows:when facing the same stochastic price and during the same period, if the trend of the raw material price is declining, the optimal inventory of the family enterprise is larger than it of the principal-agent based enterprise; and if the trend of the raw material price is increasing, the optimal inventory of the family enterprise is smaller than it of the principal-agent based enterprise; and the optimal inventory of the family enterprise is equal to it of the principal-agent based enterprise when the trend of the raw material price is zero which means the price is deterministic.The innovation suggested by this paper addresses two aspects:Firstly, innovation in the perspective of the study:Taking the maximum profit as the objective function, breaking the existing literature most from the total cost as the starting point for analysis, which has innovative in theory and logic analysis. Whether for enterprises or for individuals, profit maximization is more intuitive and practical than the cost minimization. Therefore, profit maximization as a new perspective can improve the effectiveness and sustainability of the theory. In addition, this paper starts from different company governance structures, focuses on analyzing their optimal inventories in order to maximize the profit of the enterprise.Innovation in theoretical framework:this paper establishes the analytical framework "stochastic price-profit maximization-optimal control", based on the optimal control theory, and the principal-agent model and family enterprise, and analyses the different models under this framework. In addition, the existing models are assumed in a perfectly competitive market, this paper tries to modify the models in an imperfect competition market, in which the behavior of the enterprise can affect the price in the product market. Finally, numerical simulation is studied for the models and the comparison between them.