Optimal inventory policies for non-instantaneous deteriorating items with advance sales and advertisement efforts

This paper presents optimal policies for non-instantaneous deteriorating items with a constant rate of deterioration. Inventory model is considered to be a three-phase system. The first phase is production as well as advance booking phase where together with manufacturing, products are booked in advance with a discounted price. Second phase is the sales phase where products are sold at normal selling price and there is no decay of the product in this phase. In the third phase, product starts deteriorating at constant rate and hence they are sold at a discounted rate equivalent to the rate of deterioration. Demand of the product is influenced by promotional efforts expenditure as well as selling price of the product. The aim is to determine optimum production quantity, cycle time, selling price and advertisement expenditure of the product in order to maximise total profit of the retailer. Numerical example is provided to illustrate the model and sensitivity analysis has been carried out. The study shows that advance booking helps retailer to be assured of sales of product and it gives revenue in advance. Promotional efforts through advertisement help increasing total sales.