1. Optimal pricing and replenishment policy for deteriorating inventory under stock-level-dependent, time-varying and price-dependent demand
- Author
-
Matthew F. Keblis, Gen Li, Liuxin Chen, and Xian Chen
- Subjects
021103 operations research ,General Computer Science ,Operations research ,Stock level ,0211 other engineering and technologies ,General Engineering ,02 engineering and technology ,Finite horizon ,Short life ,Profit (economics) ,Inventory management ,Decision variables ,0202 electrical engineering, electronic engineering, information engineering ,Economics ,020201 artificial intelligence & image processing ,Profitability index ,Technological advance - Abstract
Technological advance and changing customer preferences lead to falling demand with the passage of time for some products, often referred to as short life cycle. In this paper, we examine the inventory management of a short life cycle product that also deteriorates as time elapses. We consider a finite horizon multi-period setting where demand is deterministic, stock-level-dependent, time varying, and price-dependent. We seek to maximize the average profit per period by choosing an appropriate replenishment and pricing policy. Leveraging properties of the objective function, we develop an algorithm that determines the optimal value of several system decision variables that maximize profitability. We provide a numerical example that illustrates our solution approach after which we perform a sensitivity analysis.
- Published
- 2019
- Full Text
- View/download PDF