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Optimal Pricing and Inventory Decisions for Perishable Products with Multivariate Demand Function Under Trade Credit

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  • Chandan Mahato

    (Sidho-Kanho-Birsha University)

  • Gour Chandra Mahata

    (Sidho-Kanho-Birsha University)

Abstract

In inventory analysis, selling price and inventory level have a direct impact to aggrandize product’s demand to a great extent. Also, advertisement and product freshness are the most effective ways to spread out the popularity of the product for all categories of customers. On the other hand, trade credit policy is another important factor to stimulate the sales and reduces the inventory in competitive business situations. In this paper, we consider an inventory model for perishable products with multivariate demand under trade credit policy. Here, the demand is the function of freshness, selling price, displayed inventory level, and frequency in the advertisement. The main objective is to determine the optimal cycle length, optimal ending inventory level, optimal unit price, optimal frequency in advertisement, and optimal number of units displayed to maximize annual total profit. Proposed inventory model is formulated as a mixed-integer nonlinear constrained optimization problem. In this context, we discuss all the possible cases of the facilities of trade credit in the perspective of retailer and some theoretical results are derived, and an algorithm is stated in order to solve the proposed model. The numerical examples and sensitivity analysis on the optimal solution are applied to illustrate the theoretical results.

Suggested Citation

  • Chandan Mahato & Gour Chandra Mahata, 2023. "Optimal Pricing and Inventory Decisions for Perishable Products with Multivariate Demand Function Under Trade Credit," SN Operations Research Forum, Springer, vol. 4(2), pages 1-26, June.
    • Handle: RePEc:spr:snopef:v:4:y:2023:i:2:d:10.1007_s43069-023-00205-8
    DOI: 10.1007/s43069-023-00205-8
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