Pricing and Inventory Decisions of Multi-item Deteriorating Inventory System under Stock, Time and Price Sensitive Demand Policy

Abstract

In most of the inventory like food, fashion, electric materials, building materials, a retailer needs to maintain varieties of different inventory items. On the other hand, racks overflowing with a large number of quantities in an inventory attracts the attention of more customers. Besides, the selling price is a crucial factor in demand based on marketing and economic theory. Assimilating all these variates, the present paper advocates a multi-item single-period inventory model that generalizes the pricing and inventory policy for instantaneous deteriorating items. A time-varying, price-sensitive, and stock dependent demand function has been formulated. Shortages are allowed and partially backlogged. The model is developed under a known initial inventory. An iterative algorithm has been incorporated to find the optimal procedure. The prime objective of this model is to determine the selling price, time length up to zero inventory, optimal lot size so that the profit of the retailer will be maximized. The model is demonstrated with a numerical example which is followed by a sensitivity analysis.