Research On Price Discounts Of Short Life Cycle Products Among Retailers

With the soaring development of the world economy, the speed of progress in science and technology and product replacement rate has become increasingly accelerated, so more and more products are among the ranks of the short life cycle. Their value will be gradually reduced with the reducing of time, and consumers’pursuit of fashion in individuation and diversification promotes the shortening of the product life cycle. It is the characteristic of this short life cycle that will inevitably lead to many problems in management, operation, circulation and so on. For example, the distributors of this type of products have to consider whether to carry out price discounts in order to reduce inventory costs, deterioration cost and financing interest costs. If the total market demand has not changed after the carrying out of price discounts, they must weigh the pros and cons between revenue decrease and cost savings after the price discounts. Suppliers and distributors in the supply chain of short life cycle products must work closely with retailers to enhance the ability to resist risks for the supply chain as a whole and to reduce the loss caused by the bullwhip effect in the supply chain.This paper is focused on the research and analysis of price discounts among short life cycle products of the supply chain retailers. The upgrading of new products and new product pricing will affect the life cycle of the old products. What is the most optimized selection for the retailers discount about when and how to carry out price discounts and what kind of gains they will get are the main focuses of this study. According to retailers’order in the supply chain and based on market demand and supply chain finance, three kinds of cases are presented in this paper. First, the oversupply of products happens and the sales income of retailers is insufficient to pay the purchase price. Second, the oversupply of products happens and the sales income of retailers is sufficient to pay the purchase price. Third, the supply is not adequate to the demand and retailers have storage loss due to the lack of stocks.In this paper, along with considering the price discounts factor are the assumptions of only for one kind of products, supply chain finance and so on. A benefit difference model before and after the price discounts among retailers in three-stage supply chain of short life cycle products is constructed for the two cases of oversupply mentioned above, then use appropriate algorithm to find the optimal solution under different circumstances. The concept of time revenue in management accounting is also introduced in this paper, time revenue defined in this paper is revenue gained in balance time because of the relatively short life cycle after temporary price discounts among retailers within one year. The time reduced because of the shortening of product life cycle through price discounts among retailers is additional revenue for the development of the retailers. This paper quantifies the retailers’average daily profit without price discounts, and provides a practical and operational method to make price discounts decisions for retailers.