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Pricing policy for declining demand using item preservation technology.

Uttam Kumar Khedlekar1, Diwakar Shukla1, Anubhav Namdeo1

  • 1Department of Mathematics and Statistics, Dr Harisingh Gour Vishwavidyalaya (A Central University), Sagar, MP India.

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Summary
This summary is machine-generated.

This study introduces an inventory model for seasonal products, optimizing selling price and preservation investment to maximize profit. It demonstrates that profit is a concave function of key parameters, enabling optimal business strategies.

Keywords:
Declining demandDeteriorationInventoryPreservation technologyPricingReplenishment cycle

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Area of Science:

  • Operations Research
  • Supply Chain Management
  • Inventory Control

Background:

  • Seasonal products face demand fluctuations and deterioration challenges.
  • Effective inventory management is crucial for profitability, especially with perishable goods.
  • Item preservation technology offers a potential solution to mitigate product loss.

Purpose of the Study:

  • To develop an inventory model for seasonal products incorporating controllable deterioration through preservation technology investment.
  • To analyze the impact of price sensitivity and linear demand on the inventory system.
  • To determine optimal strategies for selling price, replenishment cycle, and preservation cost to maximize business profit.

Main Methods:

  • Designed a mathematical inventory model for seasonal products.
  • Incorporated price-sensitive demand with a linear decrease.
  • Analyzed profit as a concave function of selling price, replenishment time, and preservation cost.
  • Utilized numerical examples and sensitivity analysis to validate the model.

Main Results:

  • Profitability is confirmed as a concave function of optimal selling price, replenishment time, and preservation cost.
  • Simultaneous determination of optimal selling price, replenishment cycle, and preservation technology cost is achieved.
  • An optimal selling price and preservation investment strategy exists to maximize profit for any business.

Conclusions:

  • The developed inventory model provides a framework for optimizing seasonal product management.
  • Investment in item preservation technology is a viable strategy to enhance profitability.
  • The findings offer actionable insights for businesses dealing with seasonal and deteriorating products.