Joint pricing and inventory control for a deteriorating item with non-linear partial backordering under advance payment

In practice, advance payment is widely used by retailers to increase their market sale and to decrease demand estimation error. However, little attention has been paid to the influence of this scheme on the inventory control. In this paper, we propose a coordination of pricing and inventory control model for a wholesaler under advance payment strategy for a deteriorating product. Shortage is permitted and partially backlogged by time dependent backordering rate. Demand function is deterministic and dependent on price and time. Then, we characterize the optimal price, cycle time and no shortage cycle time by developing a useful algorithm. Finally, in order to illustrate the effectiveness of the model, we have studied the numerical examples and sensitive analysis on the optimal solution with respect to important parameters.

Keywords:

Pricing , Inventory control , Advance payment , Deterioration , Partial backlogging