Inventory and Pricing Decisions for Perishable Products under Age and Price Dependent Demand

Onur Kaya, Department of Industrial Engineering, Eskisehir Technical University

Abstract

Global grocery and supermarket sales are among the largest markets in the world and perishable products constitute the biggest section of these markets. Effective management of these products is an important issue for both the producers, retailers and also the world economy, since it is observed that billions of dollars' worth of products is expired and wasted every month. We consider coordinated inventory and dynamic pricing decisions for effective management of perishable products with an age and price dependent demand function. Both deterministic demand and stochastic demand cases are modeled and analyzed. The deterministic demand case is modeled through differential equations that reflect the evolution of the inventory process over time. On the other hand, dynamic programming is utilized in the stochastic demand case. In both models, optimal order quantities, optimal times to change the prices and the optimal price values depending on the system state are searched. Optimal solutions of the proposed models are analyzed, analytical results and structural characterics are shown, and managerial insights are extracted through extensive numerical experiments. It is observed that significant improvements can be obtained through dynamic pricing in these systems as compared to static pricing versions. The results can help managers of perishable products in making better inventory and pricing decisions to improve profits and decrease wastage. This is joint work with Aylin Lelizar Polat and Sajjad Rahimi Ghahroodi.

Short Bio

Onur Kaya is a professor at Eskisehir Technical University, Department of Industrial Engineering. He graduated from METU Industrial Engineering Department in 2002, and holds M.S. and Ph.D. degrees in Industrial Engineering and Operations Research (IEOR) and an M.A. degree in Statistics from University of California, Berkeley. Dr. Kaya previously worked at Koc University, Industrial Engineering Department between 2007 and 2014 before joining Eskisehir Technical University. Dr. Kaya’s research interests mostly include stochastic modeling of supply chain systems, inventory control and revenue management. Lately, he has also been working in the area of healthcare and disaster management. Dr. Kaya is the recipient of the 2018 BAGEP award and is currently a member of the Tubitak MAG Advisory Board. He has worked as the principal investigator in several academic and industry related projects and published several articles in academic journals such as Computers&OR, EJOR, Transportation Research, IISE Transactions, Omega and IJPE among many others.

Venue

Friday, December 25, 2020, 4.00 pm - Zoom Meeting