Pricing and inventory decisions for deteriorating products under shipment consolidation

Abstract

In this article, we consider a three-echelon supply chain including a manufacturer, a vendor and multiple retailers. That is a single-item inventory system which only produces deteriorating items with constant deteriorating rate. Demand in this chain is deterministic and price-sensitive, and lead time for replenishment is considered to be zero. The aim of this article is to determine the selling price, dispatch cycle length and replenishment quantity such that the total profit is maximized. In order to reduce transportation costs we use a kind of shipment group dispatching policy (time-based consolidation policy) in which shipments are consolidated to decrease the total costs. At the end, we present a numerical example to show the applicability of developed model and proposed solution method.