%0 Journal Article
%T Optimizing Inventory and Pricing Policy for Seasonal Deteriorating Products with Preservation Technology Investment
%A Yong He
%A Hongfu Huang
%J Journal of Industrial Engineering
%D 2013
%I Hindawi Publishing Corporation
%R 10.1155/2013/793568
%X The paper studies a kind of deteriorating seasonal product whose deterioration rate can be controlled by investing on the preservation efforts. In contrast to previous studies, the paper considers the seasonal and deteriorating properties simultaneously. A deteriorating inventory model is developed for this problem. We also provide a solution procedure to find the optimal decisions about the preservation technology investment, the market price, and the ordering frequency. Then a case study is used to illustrate the model and the solution procedure. Finally, sensitive analysis of the optimal solution with respect to major parameters is carried out. 1. Introduction The research on deteriorating items has begun from 1963. A model with exponentially decaying inventory was initially proposed by Ghare [1]. In recent years, many researchers have done a lot of work on inventory problems about deteriorating products. Deterioration is defined as decay, change, or spoilage such that the items are not in a condition of being used for their original purpose [2]. Electronic goods, radioactive substances, grains, alcohol, and gasoline are examples of deteriorating products. Also, for some products, the demand may exist for just a limited time horizon. We call such products as seasonal products, for example, Christmas trees or fireworks. Now, more and more products become deteriorating and seasonal simultaneously because of the competition and technology development, such as seasonal fashion goods (clothes, sweaters, shoes, etc.), high-tech electronics products (e.g., laptops, computers, mobiles, and cameras), and some seasonal food products (such as Chinese moon cake). Hence, this will become a very difficult problem to decide the inventory if the product is both deteriorating and seasonal. In this paper, we mainly study the optimal inventory decision of the seasonal deteriorating products. Some researchers have studied such deteriorating inventory model, but they do not consider that the deterioration rate can be controlled. In reality, the deterioration rate can be controlled through preservation technology investment. For example, the fruit retailer can reduce the rate of product deterioration by adopting the cool supply chain. But the preservation technology investment will lead to additional cost. Hence, a key inventory problem is to find the optimal replenishment and preservation technology investment policy which maximizes the unit time profit. This paper is the first paper to study both the preservation technology investment and pricing strategies of
%U http://www.hindawi.com/journals/jie/2013/793568/