Joint pricing and inventory decisions for perishable products with age-, stock-, and price-dependent demand rate

Abstract

This article presents a deterministic model for jointly optimising pricing and inventory control of a perishable product subject to both physical deterioration and freshness condition degradation. The demand for the product depends on its price, the current inventory level and the freshness condition. Our model allows for any positive amount of end-of-cycle inventory. Conditions for the existence and uniqueness of an optimal solution of the model are developed and an algorithm is suggested to find the optimal values of the price, the cycle length, the order quantity, and the end-of-cycle inventory. Then, numerical examples are given, and sensitivity analysis is performed. Our study contributes to satisfying the need for inventory models that consider simultaneous physical deterioration and freshness degradation of perishable products along with price-, age- and stock-dependent demand.

Keywords:

• Age-dependent demand
• deteriorating inventory
• inventory management
• lot sizing
• perishable products
• pricing
• stock-dependent demand

Disclosure statement

No potential conflict of interest was reported by the authors.