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Periodic inventory management when demand stochastically depends on shelf-stock

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Abstract

Marketing researches reveal that displayed inventory and allocated shelf space affect the demand of some retail items. We study periodic inventory policy when demand is uncertain and its probability distribution function depends on inventory level and period length. Profit function including sale revenue, holding, shortage, and ordering costs is presented. To capture real world situation we propose natural properties for demand probability distribution. Considering those properties well fitted demand distributions are presented. Finally optimal policy is explored via numerical examples. Numerical study reveals that optimal value of decision variables is not monotonic with respect to demand sensitivity to the inventory.

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Acknowledgements

The author would like to thank the Iran National Science Foundation (INSF) for funding this work.

Funding

Author has received research support from Company Iran National Science Foundation.

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  1. Tafresh University, Tafresh, Islamic Republic of Iran

    Mohammad Saffari

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  1. Mohammad Saffari
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Correspondence to Mohammad Saffari.

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Saffari, M. Periodic inventory management when demand stochastically depends on shelf-stock. OPSEARCH 59, 1489–1501 (2022). https://doi.org/10.1007/s12597-022-00596-y

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