Joint optimization of pricing, inventory control and preservation technology investment under both quality and quantity deteriorating

Abstract

This study presents a model for inventory control of deteriorating product in which both quantity and quality deterioration of the products are considered overtime. In this regard, for maximizing the profit, a new model is developed through two concepts: (1) establishing a decreasing pricing policy that depends on quality in order to prevent the decline in demand and product quality deterioration, and (2) investigating the level of investment in preservation technology as a significant solution in affecting the product deterioration rate. Consequently, it maintains the quality of products and increases their expiration date. In addition, the time value of money and inflation are well noticed in making the calculation of financial flows more accurate. To demonstrate the characteristics of the model, two comparative studies are conducted. The first one emphasizes the increase in the total profit of the inventory system caused by dynamic pricing policy, and another establishes the major impact of paying attention to the time value of money and inflation on making decisions.