IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v185y2017icp11-20.html
   My bibliography  Save this article

Pricing and lot-sizing polices for perishable goods when the demand depends on selling price, displayed stocks, and expiration date

Author

Listed:
  • Feng, Lin
  • Chan, Ya-Lan
  • Cárdenas-Barrón, Leopoldo Eduardo

Abstract

Price is a major factor on the demand based on marketing and economic theory. In addition, the demand for perishable products also depends on its freshness. Moreover, it is a well-known fact that increasing stock display (e.g., fresh fruits, vegetables, baked goods) may encourage consumers to purchase more. This paper first proposes an inventory model that stipulates the demand explicitly in a multivariate function of price, freshness, and displayed stocks. It may be profitable to have a closeout sale at a markdown price, and always keep on-hand displayed stocks fresh and plentiful if the demand is freshness-and-stock dependent. Hence, the traditional assumption of zero ending inventories is relaxed to a non-zero ending inventory. As a result, the objective is to determine three decision variables (i.e., unit price, cycle time, and ending-inventory level) in order to maximize the total profit. Then it is demonstrated that the total profit is strictly pseudo-concave in those three decision variables, which reduces the search for solutions to a unique local maximum. Finally, numerical examples to illustrate the theoretical results and to highlight managerial insights are presented.

Suggested Citation

  • Feng, Lin & Chan, Ya-Lan & Cárdenas-Barrón, Leopoldo Eduardo, 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, Elsevier, vol. 185(C), pages 11-20.
  • Handle: RePEc:eee:proeco:v:185:y:2017:i:c:p:11-20
    DOI: 10.1016/j.ijpe.2016.12.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527316303966
    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. Wang, Wan-Chih & Teng, Jinn-Tsair & Lou, Kuo-Ren, 2014. "Seller’s optimal credit period and cycle time in a supply chain for deteriorating items with maximum lifetime," European Journal of Operational Research, Elsevier, vol. 232(2), pages 315-321.
    2. Chang, Horng-Jinh & Teng, Jinn-Tsair & Ouyang, Liang-Yuh & Dye, Chung-Yuan, 2006. "Retailer's optimal pricing and lot-sizing policies for deteriorating items with partial backlogging," European Journal of Operational Research, Elsevier, vol. 168(1), pages 51-64, January.
    3. Muriana, Cinzia, 2016. "An EOQ model for perishable products with fixed shelf life under stochastic demand conditions," European Journal of Operational Research, Elsevier, vol. 255(2), pages 388-396.
    4. Chang, Chun-Tao & Teng, Jinn-Tsair & Goyal, Suresh Kumar, 2010. "Optimal replenishment policies for non-instantaneous deteriorating items with stock-dependent demand," International Journal of Production Economics, Elsevier, vol. 123(1), pages 62-68, January.
    5. Fujiwara, Okitsugu & Perera, U. L. J. S. R., 1993. "EOQ models for continuously deteriorating products using linear and exponential penalty costs," European Journal of Operational Research, Elsevier, vol. 70(1), pages 104-114, October.
    6. Steven Nahmias, 1982. "Perishable Inventory Theory: A Review," Operations Research, INFORMS, vol. 30(4), pages 680-708, August.
    7. Ruibin Bai & Graham Kendall, 2008. "A Model for Fresh Produce Shelf-Space Allocation and Inventory Management with Freshness-Condition-Dependent Demand," INFORMS Journal on Computing, INFORMS, vol. 20(1), pages 78-85, February.
    8. Gerald L. Thompson & Jinn-Tsair Teng, 1984. "Optimal Pricing and Advertising Policies for New Product Oligopoly Models," Marketing Science, INFORMS, vol. 3(2), pages 148-168.
    9. Sarker, Bhaba R. & Mukherjee, Subhasis & Balan, Chidambaram V., 1997. "An order-level lot size inventory model with inventory-level dependent demand and deterioration," International Journal of Production Economics, Elsevier, vol. 48(3), pages 227-236, February.
    10. Urban, Timothy L. & Baker, R. C., 1997. "Optimal ordering and pricing policies in a single-period environment with multivariate demand and markdowns," European Journal of Operational Research, Elsevier, vol. 103(3), pages 573-583, December.
    11. Bruce Robinson & Chet Lakhani, 1975. "Dynamic Price Models for New-Product Planning," Management Science, INFORMS, vol. 21(10), pages 1113-1122, June.
    12. Teng, Jinn-Tsair & Min, Jie & Pan, Qinhua, 2012. "Economic order quantity model with trade credit financing for non-decreasing demand," Omega, Elsevier, vol. 40(3), pages 328-335.
    13. 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.
    14. Shlomo Kalish, 1983. "Monopolist Pricing with Dynamic Demand and Production Cost," Marketing Science, INFORMS, vol. 2(2), pages 135-159.
    15. Chang, Chun-Tao & Goyal, Suresh Kumar & Teng, Jinn-Tsair, 2006. "On "An EOQ model for perishable items under stock-dependent selling rate and time-dependent partial backlogging" by Dye and Ouyang," European Journal of Operational Research, Elsevier, vol. 174(2), pages 923-929, October.
    16. Wu, Jiang & Skouri, Konstantina & Teng, Jinn-Tsair & Ouyang, Liang-Yuh, 2014. "A note on “optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment”," International Journal of Production Economics, Elsevier, vol. 155(C), pages 324-329.
    17. Wu, Jiang & Ouyang, Liang-Yuh & Cárdenas-Barrón, Leopoldo Eduardo & Goyal, Suresh Kumar, 2014. "Optimal credit period and lot size for deteriorating items with expiration dates under two-level trade credit financing," European Journal of Operational Research, Elsevier, vol. 237(3), pages 898-908.
    18. Soni, Hardik & Shah, Nita H., 2008. "Optimal ordering policy for stock-dependent demand under progressive payment scheme," European Journal of Operational Research, Elsevier, vol. 184(1), pages 91-100, January.
    19. 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.
    20. Dye, Chung-Yuan, 2013. "The effect of preservation technology investment on a non-instantaneous deteriorating inventory model," Omega, Elsevier, vol. 41(5), pages 872-880.
    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. repec:spr:annopr:v:264:y:2018:i:1:d:10.1007_s10479-017-2673-2 is not listed on IDEAS
    2. Chua, Geoffrey A. & Mokhlesi, Reza & Sainathan, Arvind, 2017. "Optimal Discounting and Replenishment Policies for Perishable Products," International Journal of Production Economics, Elsevier, vol. 186(C), pages 8-20.
    3. repec:spr:ijsaem:v:8:y:2017:i:2:d:10.1007_s13198-017-0605-9 is not listed on IDEAS
    4. repec:eee:proeco:v:193:y:2017:i:c:p:343-351 is not listed on IDEAS

    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:185:y:2017:i:c:p:11-20. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.