Joint markdown, ordering and freshness-keeping policy under demand competition between new and old products

Abstract

In this paper, a joint ordering, markdown and freshness-keeping policy is proposed for a perishable inventory system with competitive demands between new and old products. For this system, we set up a normal shelf and a discount shelf to sell new products and old products, respectively. Therefore, before the start of an selling period, the retailer needs to make three decisions: ordering quantity for new products, markdown price for old products, and freshness-keeping effort for both of them. Firstly, we solve the optimal multi-period markdown problem for such a two-shelf system under deterministic demand in different cases and obtain the optimal markdown policy. Further, we present the optimal ordering and freshness-keeping policy for this system. Secondly, considering stochastic demand, a multi-period markdown, ordering and freshness-keeping decision problem is solved by using the Q-learning technique. Thirdly, with the increase of the selling period, we research the joint optimization problem under the extension case (i.e. due to the undesirable price or quality of products, the customers give up purchasing products). Finally, numerical experiments are conducted to evaluate the performance of the proposed policy and reveal some managerial insights.

Keywords:

• Perishable inventory system
• markdown
• freshness-keeping effort
• inventory control
• Q-learning

Additional information

Funding

This research is supported by National Natural Science Foundation of China (Grant No. 61673109).