Joint pricing and inventory control for perishable products
by Li Yanzhi
Ph.D. Industrial Engineering and Logistics Management
xiii, 88 leaves : ill. ; 30 cm
In this thesis, we initially solve two problems on pricing and inventory control for perishable products and then consider a production design problem in the global supply chain in the face of Free Trade Agreement(FTA)....[ Read more ]
In this thesis, we initially solve two problems on pricing and inventory control for perishable products and then consider a production design problem in the global supply chain in the face of Free Trade Agreement(FTA).
Perishable products contribute a large portion to the retailing profit. How-ever, the management of perishable products has not been given enough atten-tion, both in the literature and in practice. There is indeed a small amount of existing literature on perishable inventory control. However, they usually made an assumption that the demand is independent on the remaining lifetime of the product. Great efforts have been made in 1980s on inventory control of perish-able products, see Nahmias (1982) for a summary for the research till then. From 1990s, researchers have paid more attention to the joint decisions of pricing and inventory control. However, this has not applied to perishable products yet. This is partially due to to the difficulty of modeling and the curse of dimensionality when trying to apply dynamic programming approach. Furthermore, no litera-ture considered the decay impact on demand function. In this thesis we make an attempt to fill in this gap. We make a tradeoff between analytical tractability and practical usability when modeling the problem. We propose and solve two differ-ent problems for different situations. One is joint pricing and inventory control for perishable products with a two-period lifetime, i.e., the lifetime is twice of the replenishment cycle. We analyze the comparative properties of the problem and numerical experiments provide us with further managerial insights. In the second problem, we allow a longer lifetime and consider the impact of the lifetime on demand function explicitly. We then make a restriction that the replenishment is made only when the product is out of stock. We propose an iterative dynamic programming to solve the problem.
In the following chapter we solve a production design problem for a multina-tional company by considering the tariff impact. A FTA is set up among countries to eliminate tarde barriers and to promote bilateral trading while at the same time to protect a fragile domestic industry. Tariff preference is central to the concept of FTA and hence also to the cost effectiveness of a global supply chain. How to configure a global production line properly to minimize the total cost, including labor cost, transportation cost and tariff, is what we will study in the thesis. We propose a very large-scale neighborhood search based heuristic to solve the problem.