Inventory Control And Revenue Management For Perishable Products

Products are subject to obsolescence progressively if they lose their value or number over time. These products are called perishable products, and the perishable properties result in a huge waste of social wealth. Appropriate inventory control, pricing and investment policies can balance inventory costs and sales revenue, which will reduce the loss of deterioration and lead to strong competitive advantages for enterprises. In this dissertation, the inventory control and revenue management problem for perishable products is investigated. The policies that minimize the total cost or maximize the profit are obtained using optimal control theory, which can provide theoretical guidance and technical support for the management for perishable products.The main contents and contributions are presented as follows:A production and remanufacturing problem of a recovery system for perishable items is investigated. Considering the recovery value of perished items and secondhand items, manufacturers can take back used products from the consumer and make use of the reusable materials. Serviceable items and recoverable items are stored separately. An optimal control model is established based on the inventory variances to minimise the total cost under capacity and no shortages constraints. The continuoustime dynamic optimal production, remanufacturing and disposal rates are obtained using Pontryagin’s maximum principle. Additionally, to highlight the advantage of the dynamic optimal policy, the case of the static optimal policy that does not vary with time is investigated and compared with the dynamic policy. It is shown that the dynamic optimal policy is significantly better than the static optimal policy.A joint static pricing and dynamic production problem for perishable items is investigated. A unimodal time-varying demand function is assumed to be convex decreasing in sales price. A dynamic optimization model is proposed to maximize total profit by allocating a limited production capacity and setting a suitable sales price. For a given sales price, the optimal production rate can be obtained by solving a dynamic optimization problem with Pontryagin’s maximum principle. By virtue of the relationships between price intervals and the corresponding optimal production policies,an effective algorithm is designed to generate the joint policy for the system. The effects of production capacity and deterioration coefficient on the optimal policy and profits are analyzed.A joint dynamic pricing and dynamic production problem for perishable products is investigated. The demand rate is price-dependent and time-varying. An optimal control model is constructed to maximize the total profit under a general nonlinear production cost function. The feature of the optimal joint dynamic pricing and production policy is analyzed by solving the corresponding optimal control problem on basis of the improved Pontryagin’s maximum principle. Then, an effective algorithm is designed to obtain the optimal joint policy. The case of the joint static optimal policy is also investigated and compared with the dynamic one. Results show that dynamic policy can can greatly improve the profitability for the firms with perishable products.A joint dynamic pricing and advertising problem for perishable products is investigated, where the time-varying demand rate is decreasing in sales price and increasing in goodwill. A dynamic optimization model is proposed to maximize total profit by setting a joint pricing and advertising policy under the constraint of a limited advertising capacity. By solving the dynamic optimization problem on basis of Pontryagin’s maximum principle, the analytical solutions of the optimal joint dynamic pricing and advertising policy are obtained. Additionally, to highlight the advantage of the joint dynamic strategy, the case of the optimal advertising with static pricing policy is considered.