Correspondence: Jeff A. Kabin, PROS, 3100 Main Street – Suite 900, Houston, Texas 77002, USA. Tel: +1 713 335 5169; Fax: +1 713 335 8144; E-mail: jkabin@prospricing.com

¹Jeff A. Kabin is a Senior Business Consultant at PROS where he matches client business needs with the technical solutions that PROS offers. Jeff earned his PhD in chemical engineering and started his career working in process development in the chemical industry. While working full time in the chemical industry he earned an MBA in finance (May 2004) and shortly thereafter he joined PROS in his current position.

Received 26 January 2006; Revised 26 January 2006.

Abstract

This paper presents a method for maintaining corporate profitability and inventory targets in a dynamic business environment by adjusting price and production rates. Maintaining profitability targets is possible during periods of dynamic raw material costs, dynamic product prices, changes in supply due to plant outages or competitor changes, and changes in demand due to natural disasters. Control of inventory levels either to maintain a steady state inventory level or to maximise profits from existing inventory stocks during periods of plant downtime is also possible. This discussion provides an analytical framework showing the forces acting upon a company along with control methods using price.