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Two-phase pricing and inventory management for deteriorating and fashion goods under trade credit

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  • Yu-Chung Tsao

Abstract

This study models a finite horizon inventory problem for deteriorating and fashion goods under trade credit and partial backlogging conditions. Demand may vary with price or time. The supplier can extend credit to the retailer. As a result, the retailer does not have to pay for goods immediately upon acquiring them, and can instead earn interest on the retail price of the goods between the time they are sold and the end of the credit period. The proposed model considers two-phase pricing and inventory decisions. In other words, it determines both the optimal prices and the lengths of the in-stock and stock-out period. This paper is the first to consider different price decisions for in-stock and stock-out periods under trade credit. We develop an algorithm to determine the optimal pricing and replenishment strategy while still maximizing the total profit. Further, this study shows that the proposed two-phase pricing strategy is superior to a one-phase pricing strategy in terms of profit maximization. Computational analysis illustrates the solution procedures and the impacts of the related parameters on decisions and profits. The results of this study can serve as references for business managers or administrators. Copyright Springer-Verlag 2010

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  • Yu-Chung Tsao, 2010. "Two-phase pricing and inventory management for deteriorating and fashion goods under trade credit," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 72(1), pages 107-127, August.
    • Handle: RePEc:spr:mathme:v:72:y:2010:i:1:p:107-127
    DOI: 10.1007/s00186-010-0309-2
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    Cited by:

    1. Chung-Yuan Dye & Tsu-Pang Hsieh, 2013. "A particle swarm optimization for solving lot-sizing problem with fluctuating demand and preservation technology cost under trade credit," Journal of Global Optimization, Springer, vol. 55(3), pages 655-679, March.
    2. Qi Chen & Qi Xu & Wenjie Wang, 2019. "Optimal Policies for the Pricing and Replenishment of Fashion Apparel considering the Effect of Fashion Level," Complexity, Hindawi, vol. 2019, pages 1-12, February.
    3. Ata Allah Taleizadeh & Nadia Pourmohammad-Zia & Ioannis Konstantaras, 2021. "Partial linked-to-order delayed payment and life time effects on decaying items ordering," Operational Research, Springer, vol. 21(3), pages 2077-2099, September.
    4. Rasa Kanapickiene & Renatas Spicas, 2019. "Credit Risk Assessment Model for Small and Micro-Enterprises: The Case of Lithuania," Risks, MDPI, vol. 7(2), pages 1-23, June.
    5. Yu-Chung Tsao & Qinhong Zhang & Hui-Ping Fang & Pei-Ling Lee, 2019. "Two-tiered pricing and ordering for non-instantaneous deteriorating items under trade credit," Operational Research, Springer, vol. 19(3), pages 833-852, September.
    6. Yu-Chung Tsao, 2015. "A piecewise nonlinear optimization for a production-inventory model under maintenance, variable setup costs, and trade credits," Annals of Operations Research, Springer, vol. 233(1), pages 465-481, October.
    7. Pentico, David W. & Drake, Matthew J., 2011. "A survey of deterministic models for the EOQ and EPQ with partial backordering," European Journal of Operational Research, Elsevier, vol. 214(2), pages 179-198, October.
    8. Dye, Chung-Yuan & Yang, Chih-Te, 2015. "Sustainable trade credit and replenishment decisions with credit-linked demand under carbon emission constraints," European Journal of Operational Research, Elsevier, vol. 244(1), pages 187-200.

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