Optimal ordering policy for perishable high-tech products based on substitutable demand

For the maximize profits, the decision of how to obtain optimal quantity for the perishable high-tech products of two generations is discussed, with downwards substitutable demand and considering the cost of out-of-stock products. By establishing stochastic demand model, the optimal ordering quantity policy is derived, with downwards substitutable demand. A numerical example is used to demonstrate that vendors would gain more profits due to taking into account the downward substitution between the perishable high-tech products. In addition, when vendors carry out substitutable strategy, they should order more products of new generation and fewer products of old generation.