Joint Pricing and Inventory Decisions for Substitutable Perishable Products Under Demand Uncertainty PDF Download
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Author: Fei Fang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Fei Fang
Publisher:
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Category :
Languages : en
Pages :
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Author: Aylin Polat
Publisher:
ISBN:
Category : Inventory control
Languages : en
Pages : 190
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Author: Guillermo Gallego
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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A pervasive problem for retailers is to make assortment and inventory procurement decisions of substitutable products with the goal of maximizing expected profits over a pre-defined selling horizon. Multiple inventory replenishments are not allowed. This problem is challenging because of demand substitution effects that are driven initially by the assortment decision and later by stockouts. We propose intuitive and easy-to-implement heuristic based on the sample average approximation method coupled with the Markov chain approximation to discrete choice modelling. We show that our heuristic is asymptotically optimal, and quite effective even in the non-asymptotic regime. Our heuristic exhibits very small optimality gaps and outperform, sometimes dramatically, traditional newsvendor solutions that ignore dynamic substitution effects. Our numerical analysis also reveals that the newsvendor heuristic may perform quite well when the assortment is properly chosen and demand variability is relatively low. These managerial insights help decide when to employ the traditional newsvendor solution. We also look into endogenous pricing and show that even a simple heuristic can significantly enhance profits if prices can be adjusted sufficiently often. Another finding is that price flexibility mitigates the need for safety stocks to the point that not hedging inventories is often better than hedging them.
Author: Ahmet Kuyumcu
Publisher:
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Languages : en
Pages :
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Author: Li-Ming Chen
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Languages : en
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ABSTRACT: A perishable item is characterized by its usefulness over a limited period of time, known as \life." Once the \life" is over, these items spoil, which obviously is a loss. The bottom line of a firm can improve significantly if some of this spoilage is prevented, i.e., if the perishable nature of products is managed properly. One mechanism by which this may be achieved is demand management using price. Through an appropriate selection of price, demand can be modulated to improve profit. The modulation of demand can not only increase revenue but also reduce shortage, holding, and spoilage costs. Potential spoilage due to limited life-time of the perishable products is the main reason demand management of perishable products is even more important than for non-perishable products. Whereas for non-perishable products the only cost of unsold inventory is the cost for holding inventory, for perishable products the unsold inventory not only incurs inventory holding cost but, in addition, with increasing age of the inventory the risk of it remaining unsold by the end of its lifetime increases. Therefore, this dissertation explores joint demand and replenishment decisions on the inventory control of perishable items with random demand. The first part of the dissertation is primarily motivated by a dilemma routinely faced by food retailers: when to replace old inventory of perishable products with fresh units when economies of scale exist in order placement. On one hand, economies of scale make it more attractive to place orders for large quantities. On the other hand, the demand for perishable products declines as their age approaches their lifetime; the reduction occurs since customers prefer fresh units and/or avoid units that are close to expiry.
Author: Kelly Yunqing Ye
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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We consider the joint pricing and inventory decision problem for a single retailer who orders, stocks and sells multiple products. The products are competitive in nature, e.g., these maybe similar products from multiple brands. Demand for a product depends on its price as well as the price of all competing products. We show that the optimal pricing and inventory policy is similar to the base-stock, list-price policy which is known to be optimal for the single product case. In addition, the base-stock level of each product is nonincreasing with the inventory level of other products. This structure suggests that one can improve profit by simultaneously managing all the products rather than managing each product independently of other products.
Author: Yanzhi Li
Publisher:
ISBN:
Category : Inventory control
Languages : en
Pages : 176
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Author: Jing-Sheng Jeannette Song
Publisher:
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Category :
Languages : en
Pages : 0
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This paper studies dynamic inventory and pricing decisions for a set of substitutable products over a finite planning horizon with full backlogging. The objective is to maximize the total expected discounted profit. We present a general stochastic, price-dependent demand model that unifies many commonly used demand models in the literature. The original formulation is not jointly concave in the decision variables and is therefore intractable. One key observation is that the problem becomes jointly concave if we work with the inverse of the price vector -- the market share vector. With this variable transformation, we are able to characterize the optimal policy and develop algorithms to compute it. In each period, the optimal policy first identifies a set of the products that are overstocked and hence need no replenishment and then specifies the optimal order-up-to levels for under-stocked products and the optimal market shares (and prices) for all products, both of which are functions of the overstocking levels. We further establish conditions under which the optimal policy demonstrates certain monotonicity property that can greatly enhance computation. Finally, we develop several computationally efficient heuristic policies and numerically compare them and discuss the interplay of pricing and inventory decisions.
Author: Biswajit Sarkar
Publisher: MDPI
ISBN: 303928522X
Category : Technology & Engineering
Languages : en
Pages : 618
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The evolution of industrial development since the 18th century is now experiencing the fourth industrial revolution. The effect of the development has propagated into almost every sector of the industry. From inventory to the circular economy, the effectiveness of technology has been fruitful for industry. The recent trends in research, with new ideas and methodologies, are included in this book. Several new ideas and business strategies are developed in the area of the supply chain management, logistics, optimization, and forecasting for the improvement of the economy of the society and the environment. The proposed technologies and ideas are either novel or help modify several other new ideas. Different real life problems with different dimensions are discussed in the book so that readers may connect with the recent issues in society and industry. The collection of the articles provides a glimpse into the new research trends in technology, business, and the environment.
Author: Oben Ceryan
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Firms that offer multiple products are often susceptible to periods of inventory mismatches where one product may face shortages while the other has excess inventories. In this paper, we study a joint implementation of price- and capacity-based substitution mechanisms to alleviate the level of such inventory disparities. We consider a firm producing substitutable products via a capacity portfolio consisting of both product dedicated and flexible resources and characterize the structure of the optimal production and pricing decisions. We then explore how changes in various problem parameters affect the optimal policy structure. We show that the availability of a flexible resource helps maintain stable price differences across products over time even though the price of each product may fluctuate over time. This result has favorable ramifications from a marketing standpoint as it suggests that even when a firm applies a dynamic pricing strategy, it may still establish consistent price positioning among multiple products if it can employ a flexible replenishment resource. We provide numerical examples for the price stabilization effect and discuss extensions of our results to a more general multiple product setting.
