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Joint pricing, advertisement, preservation technology investment and inventory policies for non-instantaneous deteriorating items under trade credit

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Abstract

To maximize profit in a competitive market environment, for retailers, it became necessary to optimize preservation, pricing, and marketing strategies together with inventory ordering policies. This study deals with the problem of optimizing price, advertisement frequency, preservation technology (PT) investment and ordering policies simultaneously for non-instantaneous deteriorating items whose deterioration rate can be reduced by investing in PT, while demand depends on both selling price and frequency of advertisement. The supplier allows some credit period to settle the account, and under this policy, three possible cases considered separately. We adopt three-parameter Weibull distribution deterioration and partial backlogs of shortages in a general framework to formulate the model. An iterative algorithm is provided to obtain the optimal solution, then the proposed model is illustrated through numerical examples. The concavity of the total profit function with respect to decision variables shown graphically. Sensitivity analysis has been conducted to investigate the impact of each parameter. PT investment and credit period are beneficial for the retailer, and also can earn more profit through advertisement. Value-added food products, such as bottled fruit juice, soft drinks, packed fruits, bread, cake, processed meat, etc., needs preservation technology and their demand depends on the price as well as marketing. Profit maximization of such items can be studied with the help of new model developed in this paper.

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Correspondence to Chaitanyakumar N. Rapolu.

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Rapolu, C.N., Kandpal, D.H. Joint pricing, advertisement, preservation technology investment and inventory policies for non-instantaneous deteriorating items under trade credit. OPSEARCH (2019). https://doi.org/10.1007/s12597-019-00427-7

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Keywords

  • Inventory
  • Trade credit
  • Preservation technology investment
  • Non-instantaneous deterioration
  • Frequency of advertisement