Abstract
In this article, we investigate a joint pricing and inventory problem for a retailer selling fresh agriproducts (FAPs) with two-period shelf lifetime in a dynamic stochastic setting, where new and old FAPs are on sale simultaneously. At the beginning of each period the retailer makes ordering decision for new FAP and sets regular and discount price for new and old inventories, respectively. After demand realization, the expired leftover is disposed and unexpired inventory is carried to the next period, continuing selling. Unmet demand of all FAPs is backordered. The objective is to maximize the total expected discount profit over the whole planning horizon. We present a price-dependent, stochastic dynamic programming model taking into account zero lead time, linear ordering costs, inventory holding, and backlogging costs, as well as disposal cost. Considering the influence of the perishability, we integrate a Multinomial Logit (MNL) choice model to describe the consumer behavior on purchasing fresh or nonfresh product. By way of the inverse of the price vector, the original formulation can be transferred to be jointly concave and tractable. Finally we characterize the optimal policy and develop effective methods to solve the problem and conduct a simple numerical illustration.
Highlights
We investigate a joint pricing and inventory problem for a retailer selling fresh agriproducts (FAPs) with two-period shelf lifetime in a dynamic stochastic setting, where new and old FAPs are on sale simultaneously
Motivated by local fresh agriproducts (FAPs) store retailing issues in its operations management, this paper investigates a revenue problem in a stochastic setting where a retailer considers a jointly pricing and inventory control issue under consumer choice
In the meantime the store shelf is replenished with a new batch of FAPs, ordered by the seller and charged a regular price on selling simultaneously with those unsold nonfresh products
Summary
Motivated by local fresh agriproducts (FAPs) store retailing issues in its operations management, this paper investigates a revenue problem in a stochastic setting where a retailer considers a jointly pricing and inventory control issue under consumer choice. The Stater Brothers store’s manager should make optimal order policy for fresh vegetables or meat and charge for both fresh and nonfresh products differently every day so that the inventory and demand can be extremely matched In essence, these examples exhibit one homogeneous competition issue which is an important concern and common in retailing practice. We formulate a novel model in which the retailer makes simultaneous decisions dynamically on charging appropriate price and optimal inventory policy for perishable products, in the presence of homogeneously selling cannibalization and demand uncertainty. At every period the retailer starts with ordering new FAPs and charging price policy for two different ages of FAPs which compete among customers in their attributes of quality and price and ends with disposing all unsold leftovers with zero shelf lifetime and carrying the leftover inventory of unexpired products to the period for continuing selling.
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