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Retailer’s inventory decisions with promotional efforts and preservation technology investments when supplier offers quantity discounts

Author

Listed:
  • Nita H. Shah

    (Gujarat University)

  • Pratik H. Shah

    (Gujarat University
    C. U. Shah Government Polytechnic)

  • Milan B. Patel

    (Gujarat University)

Abstract

In this paper, we formulate a mathematical inventory model for deteriorating items with a constant rate of deterioration. The supplier offers the retailer successive discount on purchase of goods if the order size crosses predefined quantity levels. Retailer uses preservation techniques to reduce the deterioration rate. In order to increase the sales, retailer implements promotional strategies. Market demand of the product is influenced by promotional efforts, stock level and selling price of the product. The objective is to find optimum order quantity, cycle time, promotional cost, preservation cost and selling price in order to maximize total profit for the retailer. A numerical example is given to validate the mathematical model. Sensitivity analysis has been carried out to analyze the effect of change of other inventory parameters on decision variables and total profit. Results indicate that due to preservation technology we can see remarkable decrease in the deterioration rate hence cycle time increases and retailer can set a cheaper selling price to increase sales. Promotional efforts help the retailer to enhance sales of the product. Moreover, depending upon the product demand and order size, quantity discounts help retailer to reduce the purchase cost and hence overall profit of retailer increases.

Suggested Citation

  • Nita H. Shah & Pratik H. Shah & Milan B. Patel, 2021. "Retailer’s inventory decisions with promotional efforts and preservation technology investments when supplier offers quantity discounts," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 1116-1132, December.
    • Handle: RePEc:spr:opsear:v:58:y:2021:i:4:d:10.1007_s12597-021-00516-6
    DOI: 10.1007/s12597-021-00516-6
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    References listed on IDEAS

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    1. Kartick Dey & Debajyoti Chatterjee & Subrata Saha & Ilkyeong Moon, 2019. "Dynamic versus static rebates: an investigation on price, displayed stock level, and rebate-induced demand using a hybrid bat algorithm," Annals of Operations Research, Springer, vol. 279(1), pages 187-219, August.
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    4. Chang, Hung-Chi, 2013. "A note on an economic lot size model for price-dependent demand under quantity and freight discounts," International Journal of Production Economics, Elsevier, vol. 144(1), pages 175-179.
    5. Yang, P. C., 2004. "Pricing strategy for deteriorating items using quantity discount when demand is price sensitive," European Journal of Operational Research, Elsevier, vol. 157(2), pages 389-397, September.
    6. Dye, Chung-Yuan & Yang, Chih-Te, 2016. "Optimal dynamic pricing and preservation technology investment for deteriorating products with reference price effects," Omega, Elsevier, vol. 62(C), pages 52-67.
    7. Chaitanyakumar N. Rapolu & Deepa H. Kandpal, 2020. "Joint pricing, advertisement, preservation technology investment and inventory policies for non-instantaneous deteriorating items under trade credit," OPSEARCH, Springer;Operational Research Society of India, vol. 57(2), pages 274-300, June.
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    Cited by:

    1. Nita Shah & Pratik Shah & Milan Patel, 2022. "Pricing Decisions with Effect of Advertisement and Greening Efforts for a Greengocer," Sustainability, MDPI, vol. 14(21), pages 1-12, October.
    2. Ajoy Hatibaruah & Sumit Saha, 2023. "An inventory model for two-parameter Weibull distributed ameliorating and deteriorating items with stock and advertisement frequency dependent demand under trade credit and preservation technology," OPSEARCH, Springer;Operational Research Society of India, vol. 60(2), pages 951-1002, June.

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