Inventory model with pricing tactics for demand in auto-correlated products

Abstract

It is commonly observed that the demand rates of many consumer goods are auto-correlated and are dependent on the selling price and amount of inventory displayed. The effects of dependency and auto-correlated demand are studied under a periodic review model. In this paper, an adaptive order-up-to policy based on the critical fractile is presented and a solution procedure is given. The numerical example illustrates the main characteristics of this model and the causes of this demand pattern on the safety stock.