A marketing-oriented inventory model with three-component demand rate dependent on displayed stock level (DSL)

Abstract

This paper investigates a deterministic inventory system for single item with three-component demand rate. This rate is dependent on selling price, frequency of advertisement and displayed stock level (DSL) in a showroom/shop. Shortages, if any, are allowed and backlogged partially. The storage capacity of the showroom/shop is assumed to be limited (finite). Different scenarios and subscenarios of the system have been mentioned and developed. Some numerical examples are given to illustrate the model. A sensitivity analysis is performed graphically to investigate the effect of changes of the system parameters on the optimal average profit.

Keywords:

• inventory
• DSL-dependent demand
• shortage
• limited storage
• marketing decision