Pricing and lot sizing of a decaying item under group dispatching with time-dependent demand and decay rates

Abstract

Determining appropriate inventory and pricing policies is an important issue in scientific and industrial research. Here, an inventory control model of a decaying item with zero lead time is studied. Two mathematical models under different assumptions are developed. In the first model, deterioration rate is time-dependent and demand rate is price-sensitive while in the second model, deterioration rate is constant and demand rate is time- and price-dependent. The aim of this research is optimizing total cost by deriving decision variables such as dispatch cycle length, order quantity, and wholesale price. To optimize the total cost, a shipment group dispatching policy is used.