Pricing and inventory policies for deteriorating and fashion goods

In this paper, we model a deterministic horizon inventory problem with deteriorating items and partial backlogging. Demand may vary with price, and with time, and the supplier extends credit to the retailer, so that the retailer does not have to pay for goods immediately upon acquiring them, and can instead earn interest based on retail price between the time that he sells the goods and the end of the credit period. This model incorporates many significant characteristics of real world problem, such as trade credit, price-and-time varying demand, deteriorating items and partial backlogging, which have not previously been considered in an integrated model. We develop an algorithm to determine the optimal pricing and replenishment strategy for this model. The result is useful for managers making decisions.