Decision support system for purchasing management of seasonal products: A capital-constrained retailer perspective

Abstract

With a random price-dependent demand, this paper investigates the capital-constrained retailer's integrated purchase timing, quantity and financing decisions towards seasonal products. Results show that at both purchase moments (i.e. early-purchasing at the beginning of lead time and late-purchasing at the beginning of selling season), there always exists a critical value, and when the retailer's internal capital level is less than the critical value, it will borrow from the bank to purchase a larger quantity; otherwise, it will not borrow and just use up its internal capital for purchasing. The capital-constrained retailer can get an “information bonus” from late-purchasing only when its internal capital level is relatively low, so it needs a trade-off between the “conditional information bonus” and the “inevitable cost loss” brought by late-purchasing and then makes an optimal purchase timing decision. A specific multi-parameter-based method is highlighted to solve the timing decision problem. Based on above findings, this paper designs a simple intelligent purchasing decision support system for small retailers. The proposed system integrates two main functions of purchasing and financing to help small retailers, especially those with limited working capital, make more scientific and intelligent purchasing decisions.