Optimal inventory and price markdown policy for a two-layer market with price-and-time dependent demand

Abstract

This thesis considers a SCM issue concerned with an integrated problem of inventory control and dynamic pricing strategies where demands are price-and-time dependent. The associated price markdowns are conducted for inventory control in a two-layer supply chain market consisting of a retailer and an outlet as in the fashion apparel market. The objective function consists of revenue terms (including sales revenue and salvage value) and purchasing cost term. Therewith, decisions on price markdowns and order quantity are made to maximize total profit in the overall supply chain. To solve the proposed problem, a gradient method is applied, which makes the optimal decision on both the associated initial inventory level and the discount pricing policy. Sensitivity analysis is also conducted on the demand parameters. The final comment on the practical use of the proposed model is made.