Optimal procurement and discount pricing for single-period non-instantaneous deteriorating products with promotional efforts

Retailers often use discount pricing and promotional efforts to prop up declining demand of deteriorating item nearing the end of their shelf life. In this context, we study the problem of discount pricing, promotion and ordering of non-instantaneous deteriorating single period product subject to pr...

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Bibliographic Details
Published in:Operational research 2020-03, Vol.20 (1), p.89-117
Main Authors: Nagare, Madhukar, Dutta, Pankaj, Suryawanshi, Pravin
Format: Article
Language:English
Subjects:
Business and Management
Computational Intelligence
Demand
Deterioration
Growth models
Inventory
Management Science
Mathematical models
Operations Research
Operations Research/Decision Theory
Original Paper
Pricing
Procurement
Profits
Sales promotions
Shelf life
Time dependence
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Summary:Retailers often use discount pricing and promotional efforts to prop up declining demand of deteriorating item nearing the end of their shelf life. In this context, we study the problem of discount pricing, promotion and ordering of non-instantaneous deteriorating single period product subject to promotional efforts and deterioration. In this paper, we first modify price-and time-dependent demand function (covering demand running through stages of market lifecycle) to include demand accrued from the promotional efforts and then develop inventory model to determine discount selling price and order size that maximizes total profit considering the deterioration. Later, the optimal selling period is determined using enumerative search method. The numerical examples presented to illustrate results show the benefits of exerting optimal level of promotional efforts; benefits of lengthening the non-deterioration period—larger profit with smaller order size; existence of optimal selling period; deleterious effect of deterioration—reduced profit even with enlarged order size. The model developed for non-instantaneous deteriorating item can be used for non-deteriorating as well as instantaneous deteriorating item.
ISSN:1109-2858
1866-1505
DOI:10.1007/s12351-017-0318-5