Developing a model for pricing and control the inventory of perishable products with exponential demand

Document Type : Research Paper

Authors

Department of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran

Abstract

Pricing and controlling the inventory of perishableproducts have key roles in determining the level of profit for those involved in the supply chains. Chain profit can be increased by increasing sales during the product life via the application of pricing strategies, avoiding the loss of value of perishable products over time. In this research, sales profit was maximized by presenting a mathematical model to determine the price change points (using the Hsien function) and the optimal price and order quantity for perishable products with an exponential and price- and time-dependent distributed demand. Due to the complexity of the problem, the solution method used in this study was the genetic algorithm. The analysis of the effect of different parameters and optimal solution results showed that a 2% increment in decay rate would lead to a 10% reduction in profits, and other analyses recommended for managers at the end of the article.

Keywords

Main Subjects


Abad, P. L. (2003). "Optimal pricing and lot-sizing under conditions of perishability, finite production and  partial backordering and lost sale." European Journal of Operational Research 144(3): 677-685.
Aggarwal, S. (1978). "A note on an order-level inventory model for a system with constant rate of  deterioration." Opsearch 15(4): 184-187.
Alfares, H. K. (2007). "Inventory model with stock-level dependent demand rate and variable holding  cost." International Journal of Production Economics 108(1-2): 259-265.
Avinadav, T., A. Herbon and U. Spiegel (2013). "Optimal inventory policy for a perishable item with  demand function sensitive to price and time." International Journal of Production Economics 144(2): 497-506.
Bahari-Kashani, H. (1989). "Replenishment schedule for deteriorating items with time-proportional  demand." Journal of the operational research society 40(1): 75-81.
Broekmeulen, R. A. and K. H. Van Donselaar (2009). "A heuristic to manage perishable inventory with   batch ordering, positive lead-times, and time-varying demand." Computers & Operations Research 36(11): 3013-3018.
Cave, E. F. (1963). "The Past and Present of Trauma." Surgical Clinics of North America 43(2): 317-327.
Chang, H.-J., C.-H. Hung and C.-Y. Dye (2002). "A finite time horizon inventory model with deterioration and time-value of money under the conditions of permissible delay in payments." International Journal of Systems Science 33(2): 141-151.
Chen, T.-H. and H.-M. Chang (2010). "Optimal ordering and pricing policies for deteriorating items in one-vendor multi-retailer supply chain." The International Journal of Advanced Manufacturing Technology 49(1-4): 341-355.
CHUNG, K.-J. and P.-S. TING (1994). "On replenishment schedule for deteriorating items with time-proportional demand." Production Planning & Control 5(4): 392-396.
Covert, R. P. and G. C. Philip (1973). "An EOQ model for items with Weibull distribution deterioration." AIIE transactions 5(4): 323-326.
Donaldson, W. (1977). "Inventory replenishment policy for a linear trend in demand—an analytical solution." Journal of the operational research society 28(3): 663-670.
Feng, L., Y.-L. Chan and L. E. Cárdenas-Barrón (2017). "Pricing and lot-sizing polices for perishable goods when the demand depends on selling price, displayed stocks, and expiration date." International Journal of Production Economics 185: 11-20.
Ghare, P. (1963). "A model for an exponentially decaying inventory." J. ind. Engng 14: 238-243.
Goh, M. (1994). "EOQ models with general demand and holding cost functions." European Journal of Operational Research 73(1): 50-54.
Goswami, A. and K. Chaudhuri (1992). "Variations of order-level inventory models for deteriorating items." International Journal of Production Economics 27(2): 111-117.
Goyal, S. and B. C. Giri (2003). "The production–inventory problem of a product with time varying demand, production and deterioration rates." European Journal of Operational Research 147(3): 549-557.
He, X., A. Prasad, S. P. Sethi and G. J. Gutierrez (2007). "A survey of Stackelberg differential game models  in supply and marketing channels." Journal of Systems Science and Systems Engineering 16(4): 385-413.
Hsieh, T.-P., C.-Y. Dye and L.-Y. Ouyang (2010). "Optimal lot size for an item with partial backlogging rate  when demand is stimulated by inventory above a certain stock level." Mathematical and Computer Modelling 51(1-2): 13-32.
Hwang, H. and S. W. Shinn (1997). "Retailer's pricing and lot sizing policy for exponentially deteriorating  products under the condition of permissible delay in payments." Computers & Operations Research 24(6): 539-547.
Kaya, O. and A. L. Polat (2017). "Coordinated pricing and inventory decisions for perishable products."  OR spectrum 39(2): 589-606.
Lee, Y.-P. and C.-Y. Dye (2012). "An inventory model for deteriorating items under stock-dependent   demand and controllable deterioration rate." Computers & Industrial Engineering 63(2): 474-482.
Liu, H., J. Zhang, C. Zhou and Y. Ru (2018). "Optimal purchase and inventory retrieval policies for perishable seasonal agricultural products." Omega 79: 133-145.
Mishra, S. S. and P. Mishra (2008). "Price determination for an EOQ model for deteriorating items under  perfect competition." Computers & Mathematics with Applications 56(4): 1082-1101.
Mo, J., F. Mi, F. Zhou and H. Pan (2009). "A note on an EOQ model with stock and price sensitive  demand." Mathematical and Computer Modelling 49(9-10): 2029-2036.
Rohmer, S., G. Claassen and G. Laporte (2019). "A Two-Echelon Inventory-Routing Problem for Perishable Products." Computers & Operations Research.
Rao, W. S., S. Goyal and G. Venkataraman (1963). "Effect of inoculation of Aulosira fertilissima on rice  plants." Current Science 32(8): 366-367.
San José, L., J. Sicilia and J. García-Laguna (2006). "Analysis of an inventory system with exponential  partial backordering." International Journal of Production Economics 100(1): 76-86.
Shah, Y. and M. Jaiswal (1977). "An order-level inventory model for a system with constant rate of  deterioration." Opsearch 14(3): 174-184.
Shane, S. A. (1996). "Hybrid organizational arrangements and their implications for firm growth and  survival: A study of new franchisors." Academy of management journal 39(1): 216-234.
Skouri, K. and S. Papachristos (2003). "Optimal stopping and restarting production times for an EOQ   model with deteriorating items and time-dependent partial backlogging." International Journal of Production Economics 81: 525-531.
Su, B., J. Xiao, P. Underhill, R. Deka, W. Zhang, J. Akey, W. Huang, D. Shen, D. Lu and J. Luo (1999). "Y- Chromosome evidence for a northward migration of modern humans into Eastern Asia during the last Ice Age." The American Journal of Human Genetics 65(6): 1718-1724.
Teng, J.-T., L.-Y. Ouyang and L.-H. Chen (2007). "A comparison between two pricing and lot-sizing models  with partial backlogging and deteriorated items." International Journal of Production Economics 105(1): 190-203.
Urban, T. L. (1995). "Inventory models with the demand rate dependent on stock and shortage levels." International Journal of Production Economics 40(1): 21-28.
Wu, X., Y. Lu, H. Xu, M. Lv, D. Hu, Z. He, L. Liu, Z. Wang and Y. Feng (2018). "Challenges to improve the safety of dairy products in China." Trends in food science & technology 76: 6-14.
 Whitin, T. M. (1957). Theory of inventory management, Princeton University Press.