IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v118y2009i1p331-338.html
   My bibliography  Save this article

Dynamic pricing and replenishment in the warehouse scheduling problem--A common cycle approach

Author

Listed:
  • Transchel, Sandra
  • Minner, Stefan

Abstract

In this paper, we consider the problem at the interface of marketing and operations to find the optimal lot-size and selling price for multiple products that share a warehouse with limited storage capacity. We analyze the impact of coordinated decision making on the selling price and the replenishment policy compared to a decentralized decision. Furthermore, we compare constant pricing where the selling price remains constant over the entire planning horizon and dynamic pricing where the firm is allowed to adjust the selling price continuously. The objective is to maximize the average profit by choosing the optimal pricing strategy, the optimal lot-sizes, and the optimal staggering of the order releases. This paper provides both analytical and numerical results on the impact of a joint optimization on the pricing and replenishment decisions and the potential benefits compared to the decentralized approach. We develop mathematical models for the different decision frameworks, provide algorithms to determine the optimal policy parameters, and show that the peak storage requirement is equal at each replenishment. Furthermore, we show in a numerical example that achieving operational efficiency through dynamic pricing in the warehouse scheduling problem is even more beneficial than in the economic order quantity framework.

Suggested Citation

  • Transchel, Sandra & Minner, Stefan, 2009. "Dynamic pricing and replenishment in the warehouse scheduling problem--A common cycle approach," International Journal of Production Economics, Elsevier, vol. 118(1), pages 331-338, March.
    • Handle: RePEc:eee:proeco:v:118:y:2009:i:1:p:331-338
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925-5273(08)00281-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    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. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    2. Arvind Rajan & Richard Rakesh, 1992. "Dynamic Pricing and Ordering Decisions by a Monopolist," Management Science, INFORMS, vol. 38(2), pages 240-262, February.
    3. Dov Pekelman, 1974. "Simultaneous Price-Production Decisions," Operations Research, INFORMS, vol. 22(4), pages 788-794, August.
    4. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
    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. Lin, Xuxun & Wang, Haiyan, 2022. "Dynamic pricing for online information services considering service duration and quality level," Omega, Elsevier, vol. 109(C).
    2. Zhang, Guoqing & Nishi, Tatsushi & Turner, Sarina D.O. & Oga, Keisuke & Li, Xindan, 2017. "An integrated strategy for a production planning and warehouse layout problem: Modeling and solution approaches," Omega, Elsevier, vol. 68(C), pages 85-94.
    3. Zhang, Guoqing & Shang, Xiaoting & Alawneh, Fawzat & Yang, Yiqin & Nishi, Tatsushi, 2021. "Integrated production planning and warehouse storage assignment problem: An IoT assisted case," International Journal of Production Economics, Elsevier, vol. 234(C).
    4. Buisman, M.E. & Haijema, R. & Bloemhof-Ruwaard, J.M., 2019. "Discounting and dynamic shelf life to reduce fresh food waste at retailers," International Journal of Production Economics, Elsevier, vol. 209(C), pages 274-284.

    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. Hyun-soo Ahn & Mehmet Gümüş & Philip Kaminsky, 2007. "Pricing and Manufacturing Decisions When Demand Is a Function of Prices in Multiple Periods," Operations Research, INFORMS, vol. 55(6), pages 1039-1057, December.
    2. 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.
    3. Lamas, Alejandro & Chevalier, Philippe, 2018. "Joint dynamic pricing and lot-sizing under competition," European Journal of Operational Research, Elsevier, vol. 266(3), pages 864-876.
    4. K Kogan & U Spiegel, 2006. "Optimal policies for inventory usage, production and pricing of fashion goods over a selling season," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(3), pages 304-315, March.
    5. Shiming Deng & Candace A. Yano, 2006. "Joint Production and Pricing Decisions with Setup Costs and Capacity Constraints," Management Science, INFORMS, vol. 52(5), pages 741-756, May.
    6. Zheng Shi & Zheng Wen, 2014. "Optimal Sales Discount Decision Model with Fixed Ordered Quantities," Journal of Systems Science and Information, De Gruyter, vol. 2(4), pages 345-357, August.
    7. van den Berg, A.H.J. & Herings, P.J.J. & Peters, H.J.M., 2014. "The economic order decision with continuous dynamic pricing and batch supply," Research Memorandum 001, Maastricht University, Graduate School of Business and Economics (GSBE).
    8. Qi Feng & Sirong Luo & J. George Shanthikumar, 2020. "Integrating Dynamic Pricing with Inventory Decisions Under Lost Sales," Management Science, INFORMS, vol. 66(5), pages 2232-2247, May.
    9. 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.
    10. Qing Li & Shaohui Zheng, 2006. "Joint Inventory Replenishment and Pricing Control for Systems with Uncertain Yield and Demand," Operations Research, INFORMS, vol. 54(4), pages 696-705, August.
    11. Jadidi, Omid & Taghipour, Sharareh & Zolfaghari, Saeed, 2016. "A two-price policy for a newsvendor product supply chain with time and price sensitive demand," European Journal of Operational Research, Elsevier, vol. 253(1), pages 132-143.
    12. Li, Xueping & Wang, Jiao & Sawhney, Rapinder, 2012. "Reinforcement learning for joint pricing, lead-time and scheduling decisions in make-to-order systems," European Journal of Operational Research, Elsevier, vol. 221(1), pages 99-109.
    13. Lihao Lu & Jianxiong Zhang & Wansheng Tang, 2016. "Optimal dynamic pricing and replenishment policy for perishable items with inventory-level-dependent demand," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(6), pages 1480-1494, April.
    14. Wang, Chong & Chen, Jing & Chen, Xu, 2017. "Pricing and order decisions with option contracts in the presence of customer returns," International Journal of Production Economics, Elsevier, vol. 193(C), pages 422-436.
    15. Zhu, Stuart X., 2012. "Joint pricing and inventory replenishment decisions with returns and expediting," European Journal of Operational Research, Elsevier, vol. 216(1), pages 105-112.
    16. Adam Copeland & George Hall, 2011. "The response of prices, sales, and output to temporary changes in demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(2), pages 232-269, March.
    17. Yin, Rui & Rajaram, Kumar, 2007. "Joint pricing and inventory control with a Markovian demand model," European Journal of Operational Research, Elsevier, vol. 182(1), pages 113-126, October.
    18. Netessine, Serguei, 2006. "Dynamic pricing of inventory/capacity with infrequent price changes," European Journal of Operational Research, Elsevier, vol. 174(1), pages 553-580, October.
    19. Georgia Perakis & Melvyn Sim & Qinshen Tang & Peng Xiong, 2023. "Robust Pricing and Production with Information Partitioning and Adaptation," Management Science, INFORMS, vol. 69(3), pages 1398-1419, March.
    20. Ravi Kumar, K. & Hadjinicola, George C., 1996. "Resource allocation to defensive marketing and manufacturing strategies," European Journal of Operational Research, Elsevier, vol. 94(3), pages 453-466, 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:eee:proeco:v:118:y:2009:i:1:p:331-338. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    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.