IDEAS home Printed from https://ideas.repec.org/a/spr/mathme/v88y2018i1d10.1007_s00186-017-0626-9.html
   My bibliography  Save this article

Inventory control and pricing for perishable products under age and price dependent stochastic demand

Author

Listed:
  • Onur Kaya

    (Anadolu University)

  • Sajjad Rahimi Ghahroodi

    (Koç University)

Abstract

Perishable products have a short lifetime and cause a high amount of wastage when managed ineffectively, due to their deterioration over time. We consider coordinated inventory and pricing decisions for perishable products in a periodically-reviewed inventory system with an age and price dependent random demand. We consider the products with a fixed shelf lifetime and use dynamic programming to model this system. We prove certain structural characteristics of the optimal solution and also analyze the effect of different parameters on the optimal solution through numerical experiments. In addition, we analyze simple-to-implement inventory control policies, namely quantity-based and age-based policies, and investigate their effectiveness.

Suggested Citation

  • Onur Kaya & Sajjad Rahimi Ghahroodi, 2018. "Inventory control and pricing for perishable products under age and price dependent stochastic demand," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 88(1), pages 1-35, August.
    • Handle: RePEc:spr:mathme:v:88:y:2018:i:1:d:10.1007_s00186-017-0626-9
    DOI: 10.1007/s00186-017-0626-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00186-017-0626-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00186-017-0626-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wee, Hui-Ming, 1999. "Deteriorating inventory model with quantity discount, pricing and partial backordering," International Journal of Production Economics, Elsevier, vol. 59(1-3), pages 511-518, March.
    2. Onur Kaya & Aylin Lelizar Polat, 2017. "Coordinated pricing and inventory decisions for perishable products," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(2), pages 589-606, March.
    3. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    4. George E. Monahan & Nicholas C. Petruzzi & Wen Zhao, 2004. "The Dynamic Pricing Problem from a Newsvendor's Perspective," Manufacturing & Service Operations Management, INFORMS, vol. 6(1), pages 73-91, September.
    5. P-S You, 2005. "Inventory policy for products with price and time-dependent demands," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(7), pages 870-873, July.
    6. Steven Nahmias, 1982. "Perishable Inventory Theory: A Review," Operations Research, INFORMS, vol. 30(4), pages 680-708, August.
    7. Avinadav, Tal & Herbon, Avi & Spiegel, Uriel, 2013. "Optimal inventory policy for a perishable item with demand function sensitive to price and time," International Journal of Production Economics, Elsevier, vol. 144(2), pages 497-506.
    8. Goyal, S. K. & Giri, B. C., 2001. "Recent trends in modeling of deteriorating inventory," European Journal of Operational Research, Elsevier, vol. 134(1), pages 1-16, October.
    9. Yi Yang & Youhua (Frank) Chen & Yun Zhou, 2014. "Coordinating Inventory Control and Pricing Strategies Under Batch Ordering," Operations Research, INFORMS, vol. 62(1), pages 25-37, February.
    10. Wen Zhao & Yu-Sheng Zheng, 2000. "Optimal Dynamic Pricing for Perishable Assets with Nonhomogeneous Demand," Management Science, INFORMS, vol. 46(3), pages 375-388, March.
    11. Steven Nahmias, 1975. "Optimal Ordering Policies for Perishable Inventory—II," Operations Research, INFORMS, vol. 23(4), pages 735-749, August.
    12. Bakker, Monique & Riezebos, Jan & Teunter, Ruud H., 2012. "Review of inventory systems with deterioration since 2001," European Journal of Operational Research, Elsevier, vol. 221(2), pages 275-284.
    13. van Donselaar, Karel H. & Broekmeulen, Rob A.C.M., 2012. "Approximations for the relative outdating of perishable products by combining stochastic modeling, simulation and regression modeling," International Journal of Production Economics, Elsevier, vol. 140(2), pages 660-669.
    14. Benkherouf, Lakdere, 1995. "On an inventory model with deteriorating items and decreasing time-varying demand and shortages," European Journal of Operational Research, Elsevier, vol. 86(2), pages 293-299, October.
    15. Chew, Ek Peng & Lee, Chulung & Liu, Rujing, 2009. "Joint inventory allocation and pricing decisions for perishable products," International Journal of Production Economics, Elsevier, vol. 120(1), pages 139-150, July.
    16. Arvind Rajan & Richard Rakesh, 1992. "Dynamic Pricing and Ordering Decisions by a Monopolist," Management Science, INFORMS, vol. 38(2), pages 240-262, February.
    17. Avinadav, Tal & Herbon, Avi & Spiegel, Uriel, 2014. "Optimal ordering and pricing policy for demand functions that are separable into price and inventory age," International Journal of Production Economics, Elsevier, vol. 155(C), pages 406-417.
    18. 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, Elsevier, vol. 144(3), pages 677-685, February.
    19. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
    20. Brant E. Fries, 1975. "Optimal Ordering Policy for a Perishable Commodity with Fixed Lifetime," Operations Research, INFORMS, vol. 23(1), pages 46-61, February.
    21. Xin Chen & Zhan Pang & Limeng Pan, 2014. "Coordinating Inventory Control and Pricing Strategies for Perishable Products," Operations Research, INFORMS, vol. 62(2), pages 284-300, April.
    22. Howard J. Weiss, 1980. "Optimal Ordering Policies for Continuous Review Perishable Inventory Models," Operations Research, INFORMS, vol. 28(2), pages 365-374, April.
    23. Transchel, Sandra & Minner, Stefan, 2009. "The impact of dynamic pricing on the economic order decision," European Journal of Operational Research, Elsevier, vol. 198(3), pages 773-789, November.
    24. P. L. Abad, 1996. "Optimal Pricing and Lot-Sizing Under Conditions of Perishability and Partial Backordering," Management Science, INFORMS, vol. 42(8), pages 1093-1104, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yingying Zhang & Yi Chai & Le Ma, 2021. "Research on Multi-Echelon Inventory Optimization for Fresh Products in Supply Chains," Sustainability, MDPI, vol. 13(11), pages 1-15, June.
    2. Julia Kleineidam, 2020. "Fields of Action for Designing Measures to Avoid Food Losses in Logistics Networks," Sustainability, MDPI, vol. 12(15), pages 1-20, July.
    3. Ehsan Ahmadi & Dale T. Masel & Seth Hostetler & Reza Maihami & Iman Ghalehkhondabi, 2020. "A centralized stochastic inventory control model for perishable products considering age-dependent purchase price and lead time," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 28(1), pages 231-269, April.
    4. Yiju Wang & Donglei Du & Jingfu Huang, 2021. "Optimal Replenishment Strategy for Inventory Mechanism with Step-Shaped Demand," Journal of Optimization Theory and Applications, Springer, vol. 190(3), pages 841-860, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Onur Kaya & Aylin Lelizar Polat, 2017. "Coordinated pricing and inventory decisions for perishable products," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(2), pages 589-606, March.
    2. Avinadav, Tal, 2020. "The effect of decision rights allocation on a supply chain of perishable products under a revenue-sharing contract," International Journal of Production Economics, Elsevier, vol. 225(C).
    3. Chernonog, Tatyana & Avinadav, Tal, 2019. "Pricing and advertising in a supply chain of perishable products under asymmetric information," International Journal of Production Economics, Elsevier, vol. 209(C), pages 249-264.
    4. Zahra Azadi & Harsha Gangammanavar & Sandra Eksioglu, 2020. "Developing childhood vaccine administration and inventory replenishment policies that minimize open vial wastage," Annals of Operations Research, Springer, vol. 292(1), pages 215-247, September.
    5. Herbon, Avi, 2017. "Should retailers hold a perishable product having different ages? The case of a homogeneous market and multiplicative demand model," International Journal of Production Economics, Elsevier, vol. 193(C), pages 479-490.
    6. Li‐Ming Chen & Amar Sapra, 2021. "Inventory renewal for a perishable product: Economies of scale and age‐dependent demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(3), pages 359-377, April.
    7. Chen, Jing & Dong, Ming & Rong, Ying & Yang, Liang, 2018. "Dynamic pricing for deteriorating products with menu cost," Omega, Elsevier, vol. 75(C), pages 13-26.
    8. Xiuli Chao & Xiting Gong & Cong Shi & Huanan Zhang, 2015. "Approximation Algorithms for Perishable Inventory Systems," Operations Research, INFORMS, vol. 63(3), pages 585-601, June.
    9. Janssen, Larissa & Diabat, Ali & Sauer, Jürgen & Herrmann, Frank, 2018. "A stochastic micro-periodic age-based inventory replenishment policy for perishable goods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 445-465.
    10. Hanukov, Gabi & Avinadav, Tal & Chernonog, Tatyana & Yechiali, Uri, 2020. "A service system with perishable products where customers are either fastidious or strategic," International Journal of Production Economics, Elsevier, vol. 228(C).
    11. Tal Avinadav & Tatyana Chernonog & Yael Lahav & Uriel Spiegel, 2017. "Dynamic pricing and promotion expenditures in an EOQ model of perishable products," Annals of Operations Research, Springer, vol. 248(1), pages 75-91, January.
    12. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    13. Xiong‐zhi Wang & Guo‐qing Wang, 2019. "Integrating dynamic pricing and inventory control for fresh‐agri product under consumer choice," Australian Economic Papers, Wiley Blackwell, vol. 58(1), pages 96-111, March.
    14. Dehghani, Maryam & Abbasi, Babak & Oliveira, Fabricio, 2021. "Proactive transshipment in the blood supply chain: A stochastic programming approach," Omega, Elsevier, vol. 98(C).
    15. Wang, Xiaojun & Li, Dong, 2012. "A dynamic product quality evaluation based pricing model for perishable food supply chains," Omega, Elsevier, vol. 40(6), pages 906-917.
    16. Ketzenberg, Michael & Oliva, Rogelio & Wang, Yimin & Webster, Scott, 2023. "Retailer inventory data sharing in a fresh product supply chain," European Journal of Operational Research, Elsevier, vol. 307(2), pages 680-693.
    17. J-M Chen & L-T Chen, 2004. "Pricing and lot-sizing for a deteriorating item in a periodic review inventory system with shortages," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(8), pages 892-901, August.
    18. Xiang Li & Guohua Sun & Yongjian Li, 2016. "A multi-period ordering and clearance pricing model considering the competition between new and out-of-season products," Annals of Operations Research, Springer, vol. 242(2), pages 207-221, July.
    19. N. Bora Keskin & Yuexing Li & Jing-Sheng Song, 2022. "Data-Driven Dynamic Pricing and Ordering with Perishable Inventory in a Changing Environment," Management Science, INFORMS, vol. 68(3), pages 1938-1958, March.
    20. Hailun Zhang & Jiheng Zhang & Rachel Q. Zhang, 2020. "Simple Policies with Provable Bounds for Managing Perishable Inventory," Production and Operations Management, Production and Operations Management Society, vol. 29(11), pages 2637-2650, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:mathme:v:88:y:2018:i:1:d:10.1007_s00186-017-0626-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.