On jointly optimising the changes of seasonable goods and inventory replenishment

Zhaolin Li, Feng Tao and Daewon Sun

International Journal of Systems Science, 2012, vol. 43, issue 6, 1064-1076

Abstract: Retailers often need to replace soon-to-be-unseasonable products with new seasonable goods when the season changes. The trade-off for such activities involves choosing between the salvage loss of the unseasonable product and the profit of selling the seasonable product early. This article develops a periodic-review inventory model for planning the changes of seasonable goods with state-dependent demand and cost parameters. We show that the single-period optimal policy for product changes is a threshold policy based on the initial inventory of the unseasonable goods. The corresponding optimal inventory policy follows a Purchase-Keep-Dispose policy if the incumbent product is kept or a base-stock policy if the incumbent product is replaced. Numerically, we find that the structure of the multi-period optimal policy resembles that of the single-period model. We propose a heuristic to solve the multi-period model and demonstrate its effectiveness. Our research provides insights into dynamically managing seasonable goods.

Date: 2012
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DOI: 10.1080/00207721.2011.554912

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