Simulation based optimisation Model for a joint inventory pricing problem for perishables
Abstract
We consider the problem of jointly determining the optimal pricing and inventory replenishment strategy for a perishable inventory system in which demand is stochastic and price dependent. The perishable item is assumed to have a fixed life time. The retailer has the opportunity to change prices every period of the planning horizon in order to boost customer's demand. We investigate the impact of this practice on improving revenues and reducing the waste. We develop a simulation based optimization model to find the best dynamic pricing strategy and the optimal order quantity. We analyze the effectiveness of discrete pricing policy by comparing the profit obtained and the amount of items wasted with another pricing strategy. We also analyze the effect of different parameters on the optimal solution through numerical experiments.