A non-instantaneous inventory model of agricultural products considering deteriorating impacts and pricing policies
ISSN: 0368-492X
Article publication date: 12 October 2020
Issue publication date: 22 July 2021
Abstract
Purpose
External factors such as improper handling, extreme weather and insect attacks affect product quality. It is most obvious in fruit products which have a high deterioration rate. Moreover, decaying fruits will increase the deteriorating of other good ones. The purpose of this study is to derive the optimal pricing and replenishment decisions for agricultural products considering the effect of external factors that induce deterioration.
Design/methodology/approach
In this paper, the study investigates ways to reduce the product deterioration rate by separating the near defective items from the other good products and accelerating the quick sales of the near defective items at a discounted price. The objective is to maximize the total profit by optimizing the selling price and the replenishment cycles. Two scenarios are investigated. In the first scenario, the retailer offers a selling price discount for near defective products to stimulate customer demand. In the second scenario, the retailer does not offer such discounts.
Findings
An algorithm to solve the model is derived. Further, numerical examples are developed to compare the total profit for the two scenarios. Theoretical derivations and graphical results show the concavity of the profit function. Finally, the sensitivity analysis shows that the total profit of the discount model is higher.
Originality/value
This study contributes to a new pricing and inventory decision model. The research provides insights to retailers on making optimal pricing and replenishment decisions for non-instantaneous deterioration items, as well as reducing the external factors that influence higher deterioration rate through separating good products from the near defective ones which are sold at a discount to induce the sale.
Keywords
Acknowledgements
The first author is grateful to the Institute of Research and Training (IRT), Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh for their financial assistance in the fiscal year 2019-2020 to carry out the research (Code 5921). All the authors also thank the editors and reviewers for their comments and suggestions to improve this paper.
Funding: This research received a support from the institute of Research and Training (IRT), Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh (Code 5921).
Conflict of interest: The authors declare no conflict of interest.
Citation
Hasan, M.R., Mashud, A.H.M., Daryanto, Y. and Wee, H.M. (2021), "A non-instantaneous inventory model of agricultural products considering deteriorating impacts and pricing policies", Kybernetes, Vol. 50 No. 8, pp. 2264-2288. https://doi.org/10.1108/K-05-2020-0288
Publisher
:Emerald Publishing Limited
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