Joint pricing, inventory, and preservation decisions for deteriorating items with stochastic demand and promotional efforts

Hardik N Soni,Ashaba D Chauhan

doi:10.1007/s40092-018-0265-7

Abstract

This study models a joint pricing, inventory, and preservation decision-making problem for deteriorating items subject to stochastic demand and promotional effort. The generalized price-dependent stochastic demand, time proportional deterioration, and partial backlogging rates are used to model the inventory system. The objective is to find the optimal pricing, replenishment, and preservation technology investment strategies while maximizing the total profit per unit time. Based on the partial backlogging and lost sale cases, we first deduce the criterion for optimal replenishment schedules for any given price and technology investment cost. Second, we show that, respectively, total profit per time unit is concave function of price and preservation technology cost. At the end, some numerical examples and the results of a sensitivity analysis are used to illustrate the features of the proposed model.

Highlights

In inventory system of perishable products, the deterioration is well-known phenomenon that reduces the amount or value of those products with time during storage period
Based on the above discussion, this study aims at formulating profit maximization inventory model for deteriorating items with stochastic price sensitive demand and promotional efforts
A shortage followed by inventory model for a joint pricing, inventory, and preservation decision for deteriorating items is presented

Summary

Introduction

In inventory system of perishable products, the deterioration is well-known phenomenon that reduces the amount or value of those products with time during storage period. Cardenas-Barron and Sana (2015) presented an economic order quantity inventory model in two-layer supply chain of multi items, where demand is sensitive with promotional effort. Promotion and price helps to increase the product demand In this direction, Zhang et al (2008) presented an analytical model for obtaining optimal decisions on pricing, promotion, and inventory control. Maihami and Karimi (2014) presented the problem of pricing and replenishment policy for non-instantaneous deteriorating items subject to promotional efforts. Zhang et al (2008) investigated the optimal decision on price, promotion and inventory control subject to stochastic demand. Based on the above discussion, this study aims at formulating profit maximization inventory model for deteriorating items with stochastic price sensitive demand and promotional efforts.

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Conclusions

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