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Optimal pricing and lot-sizing policy for supply chain system with deteriorating items under limited storage capacity

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  • Tiwari, Sunil
  • Jaggi, Chandra K.
  • Gupta, Mamta
  • Cárdenas-Barrón, Leopoldo Eduardo

Abstract

This research work considers a two-echelon supply chain model for deteriorating items in which the retailer's warehouse capacity of display area is limited. Therefore, the retailer stores remaining units in the back room which has unlimited capacity. The demand rate is assumed to be dependent on the retailer's selling price and displayed stock level. The proposed approach explicitly models the interdependence among price of a product, demand for the product and the integration among the retailer and the supplier under four different policies: non-integrated, integrated, supplier-led Stackelberg policy and retailer-led Stackelberg policy. Furthermore, this paper also establishes several theoretical results to show that the solution provides the maximum total relevant profit. By using differential calculus method, it is proved that the optimal solution not only exists but also is unique. In this study, the impact of price, inventory level and the integration among retailer and the supplier is explicitly analyzed in the emerging retail scenario with limited shelf space.

Suggested Citation

  • Tiwari, Sunil & Jaggi, Chandra K. & Gupta, Mamta & Cárdenas-Barrón, Leopoldo Eduardo, 2018. "Optimal pricing and lot-sizing policy for supply chain system with deteriorating items under limited storage capacity," International Journal of Production Economics, Elsevier, vol. 200(C), pages 278-290.
    • Handle: RePEc:eee:proeco:v:200:y:2018:i:c:p:278-290
    DOI: 10.1016/j.ijpe.2018.03.019
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    16. Maihami, Reza & Govindan, Kannan & Fattahi, Mohammad, 2019. "The inventory and pricing decisions in a three-echelon supply chain of deteriorating items under probabilistic environment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 118-138.
    17. Alım, Muzaffer & Beullens, Patrick, 2020. "Joint inventory and distribution strategy for online sales with a flexible delivery option," International Journal of Production Economics, Elsevier, vol. 222(C).
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    19. Poormoaied, Saeed & Atan, Zümbül, 2020. "A multi-attribute utility theory approach to ordering policy for perishable items," International Journal of Production Economics, Elsevier, vol. 225(C).
    20. Yang, Lei & Tang, Ruihong, 2019. "Comparisons of sales modes for a fresh product supply chain with freshness-keeping effort," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 425-448.

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