A multi-period profit maximizing model for retail supply chain management: An integration of demand and supply-side mechanisms

We present a multi-period inventory and pricing model for a single product, where the product has a fixed life perishability for a certain number of periods. This problem has significant importance for an efficient operation of the marketing/manufacturing interface at the retail end of the supply chain. The profit maximization problem is modeled as a dynamic program, and the Wagner-Whitin dynamic programming recursions are developed for both perishable and non-perishable products. The structural properties of the model are investigated, and it is shown that the maximum profit function is continuous piecewise concave. Two efficient search heuristics are presented, and the results are compared with benchmark optimum values. The heuristics have been extensively tested and the results indicate that the proposed approach is robust, efficient and practically viable. Directions for future research are presented. (C) 2000 Elsevier Science B.V. All rights reserved.