Data Science in Finance and Economics (Feb 2024)
Optimizing pricing and promotions for sustained profitability in declining markets: A Green-Centric inventory model
Abstract
In the face of a competitive and ever-changing business landscape, companies often grapple with the challenge of sustaining their products in declining markets. To combat this issue, effective strategies such as promotional efforts play a pivotal role in boosting demand and maintaining market position. Additionally, businesses are increasingly focusing on ecological safety and greening efforts to minimize their environmental impact while ensuring the production of environmentally friendly products. These green initiatives not only contribute to environmental sustainability but can also enhance retailer profitability. This article presents an innovative inventory model tailored for perishable products within a stochastic environment. The model integrates elements such as linear pricing, time dynamics, promotional efforts, and a demand rate that depends non-linearly on the level of greening efforts. The model also considers partial backlogging of shortages, lost sales, time-dependent product deterioration, and investments in preservation technology to mitigate deterioration effects. The primary objective is to calculate the retailer's profit function, taking into account cycle time, selling price, promotional effort, and greening effort as key variables. To address this complex problem, the article introduces an algorithm for finding feasible solutions. Furthermore, the concavity of these solutions is demonstrated through graphical analysis. A numerical example is provided to illustrate the application of the model, and sensitivity analysis is conducted to elucidate how changes in inventory parameters impact decision variables. We will also depicted the short representation of proposed study in Figure 1.
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