Integrated inventory and pricing decisions for pre-existing and new entrance products considering product life-cycle

Today’s business landscape requires understanding the dynamic nature of the product life cycle (PLC) when making inventory decisions. This paper presented an integrated inventory-pricing model for a supply chain consisting of a single retailer, a pre-existing product manufacturer, and a new entrance product manufacturer. The model incorporated the PLC framework, encompassing the introduction-growth, maturity, and decline phases. In this competitive setting, the pre-existing product (PEP) has already progressed through part of its PLC when the new pro-environmental product (NPP) enters the market. To address the unique characteristics of each PLC phase, each manufacturer offers distinct incentive policies to the retailer in each phase. The demand for PEP is influenced by time and the progressively decreasing retail prices of both products, while the demand for NPP depends on time, retail prices, and the product’s greenness level. The results demonstrated that manufacturer incentive policies, including credit payments during the maturity phase, significantly increase profits for all three supply chain members. Moreover, extending the maturity phase of PEP and the introduction-growth and maturity phases of NPP enhances the retailer’s profitability.