A non-myopic dynamic inventory routing and pricing problem

Abstract

A new framework for the design of a dynamic non-myopic inventory and delivery network between suppliers and retailers under the assumption of elastic demand—one that simultaneously incorporates inventory, routing, and pricing—is proposed. The developed queuing approximation method is based on optimal tolling of queues. We propose a dynamic approach for a supplier who has to deliver products to a number of retailers while maximizing social welfare through dynamic pricing that accounts for customer waiting times, inventory holding, lost-sales costs, and delivery costs. The proposed non-myopic model increases the social welfare by up to 17% compared to the marginal pricing case.