Pdf Effects Of Dynamic Pricing Of Perishable Products On Revenue And Waste

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Skip to Main Content. A not-for-profit organization, IEEE is the world's largest technical professional organization dedicated to advancing technology for the benefit of humanity. Use of this web site signifies your agreement to the terms and conditions. Sustainable Dynamic Pricing for Perishable Food with Stochastic Demand Abstract: In current competitive environment, retailers are facing a fierce competition and are aiming to manipulate customer purchasing attitudes. Dynamic pricing strategy is a major determinant of retailer's profitability when considering perishable food.

Quality and Operations Management in Food Supply Chains: A Literature Review

We present a literature review on quality and operations management problems in food supply chains. In food industry, the quality of the food products declines over time and should be addressed in the supply chain operations management. Managing food supply chains with operations management methods not only generates economic benefit, but also contributes to environmental and social benefits.

The literature on this topic has been burgeoning in the past few years. Since , more than articles have been published on this topic in major operations research and management science journals.

In this literature review, we concentrate on the quantitative models in this research field and classify the related articles into four categories, that is, storage problems, distribution problems, marketing problems, and food traceability and safety problems.

We hope that this review serves as a reference for interested researchers and a starting point for those who wish to explore it further. Food quality, including safety, has been a major concern faced by the food industry, partly due to a series of food safety crises and scandals [ 1 ]. Quality of the food products continuously changes as they move along the supply chain, which can lead to significant social, economic, and environmental consequences.

Food spoilage is one of the major issues related to food safety and quality. When food products move from farms to food processors, food retailers, and end customers, spoilage cannot be avoided. Food perishability may cause huge wastes. It is estimated by the United Nations that approximately one-third of all food produced for human consumption is wasted each year. In addition to the economic impacts, food perishability also caused food safety problems in many regions.

According to the WHO [ 7 ], about million people became ill after consuming contaminated food each year. Among them , died, including , children under the age of five years. This has raised serious concern about food safety in many countries.

The improvement of preservation technologies has provided many tools to reduce waste and improve safety in food supply chains. Many extensive literature reviews have been conducted on preservation and traceability technology adoptions in food supply chains. For example, Mercier et al. Badia-Melis et al. The adoption of various temperature control or traceability technologies allows information to be gathered to optimize inventory decisions, distribution decisions, and retail strategy even enhance safety in food supply chains.

Also, the research progress in operations management provides many opportunities for companies to reduce product waste due to decaying and to enhance food quality. Akkerman et al. In this article, we mainly concentrate on the quantitative operations management models related to food quality management. The goal is to present the latest research development in this field and to identify future research opportunities.

As such, we propose the following two research questions: 1 what are the state-of-the-art development and trends in quantitative operations management research regarding food quality management? This paper is organized as follows: Section 2 presents the methodology of this research along with a descriptive analysis of the existing studies. Section 3 provides details of operations management problems and related research along the food supply chain, including storage, distribution, marketing, and traceability optimization.

Section 4 is about the research implications and directions for future research. Section 5 discusses the conclusions and limitations of this review. To address the research questions, the study reviews the literature of food quality management in supply chains. The study aims to review published peer-reviewed articles in the targeted area from to The search was conducted based on the combination of two categories of key words; one is related to food quality and the other is related to operations management.

Using such kind of keywords search in the databases, we found articles in total. In this stage, all articles were prudently reviewed. The searching guidelines and results are presented in Table 1. An article was removed from this study if it was not related to food quality, operations management, or not using quantitative methods.

The remaining publications were then classified according to a conceptual framework proposed in Section 3. The number of publications in different time periods is presented in Figure 1 to show the evolution of research interest in this topic. Between and , there were a total of articles on the operations management related to food quality in food supply chains.

The number of the articles is rather limited before the year Then the number rises slowly from to Since , scholars have become more interested in this topic. The statistics show that while the total number of research in this area is still small, interest in this field has grown rapidly in recent years. Figure 2 presents the distribution of articles in these major publication outlets. The articles included in this study were published in more than 30 journals on operations management or food quality.

The first half of the papers contributes to about 80 percent of the total papers. After carefully reading the articles, we found that these papers represent an appropriate overview of the current state-of-the-art research in the area of operations management and food quality control in food supply chains. In this section, quality and operations management problems in food supply chains are discussed in detail. More specifically, we discuss the main issues with regard to related operations management problems, followed by a discussion of research challenges.

In order to identify the progress and gaps in the existing literature on food quality and operations management models, a conceptual framework is constructed to understand the key decisions, as shown in Figure 3.

The framework helps us understand the achievements, challenges, and opportunities in the research on food quality and operations management models. Section 3. Next, Section 3. Lastly, Section 3. A lot of researches deal with inventory management of perishable products, where their production or distribution planning is based upon an exogenous perishable rate. For example, fruits in supermarkets will perish in the selling period until they are not safe to eat.

In other words, the perishable rate highly depends on not only the natural perishable rate largely determined by environmental factors such as temperature, humidity, light, oxygen content, and microbial content but also the preservation technology used in the warehouse and transportation vehicles. Although the perishing process for food products is natural and cannot be stopped, it can be slowed down by specialized equipment, such as refrigerators and humidifiers, to make temperature low and humidity suitable for certain fruits.

Hence, it is practical and important to consider inventory decisions with preservation technology investment decision. The goal is to maximize the total profit or minimize the total cost by finding an optimal set of preservation investment level, price, or ordering quantity. Hsu et al. Under the assumption that the deterioration rate is exponentially linked to the investment level, they proposed a method to determine the optimal replenishment cycle, shortage period, order quantity, and preservation technology cost so as to maximize the total profit per unit time.

Numerical examples were presented to obtain further results. Lee and Dye [ 12 ] extended the model of Hsu et al. An algorithm was also proposed to solve the optimization model and determine the optimal replenishment and preservation technology investment. Dye and Hsieh [ 13 ] assumed that the deterioration cost is associated with both the preservation investment and the time instance. The objective is to find the optimal replenishment and preservation technology investment strategies while maximizing the total profit per unit time over the infinite planning horizon.

Dye [ 14 ] assumed that the deterioration rate is noninstantaneous and controllable. The generalized productivity of invested capital, deterioration, and time-dependent partial backlogging rates were used to model the inventory system. The uniqueness of the global maximization was proved using fractional programming. Chen and Dye [ 15 ] proposed a finite time horizon inventory and preservation investment model, in which the preservation investment can be different in each replenishment cycle.

They utilized particle swarm optimization to solve the nonlinear programming problem. He and Huang [ 16 ] studied the optimal preservation, pricing, and ordering decisions for a kind of seasonal products.

Hsieh et al. A particle swarm optimization approach was also employed to solve the nonlinear programming problem.

Singh and Sharma [ 17 ] studied an inventory model with ramp-type demand rate, controllable deterioration rate, and two-level trade credit, in which shortages were allowed and partially backlogged.

Bardhan et al. They studied two models depending on the on-hand stock finish time: before and after the deterioration starts. Yang et al. They studied a retailer selling perishable products to customers and offering a credit period to its customers to buy the products. They established a model to determine the optimal trade credit periods, preservation technology investment, and ordering strategies that maximize the total profit over a finite planning horizon.

Unlike previous studies, Dye and Yang [ 20 ] treated the selling price as a decisions variable. Theoretical results were obtained to demonstrate the existence of an optimal solution for the inventory problem. A simple iterative algorithm was utilized to solve the proposed model by employing the theoretical results. Features of the proposed model were illustrated with sensitivity analysis. Kouki et al. They studied the impacts of the application of Time Temperature Integrator TTI technology on the inventory management decisions.

Zhang et al. The analytical solution for dynamic service investment was obtained under the given sales price, preservation technology, and replenishment cycle by solving an optimal control problem.

The impact of common resource constraint on the optimal investment policy was investigated. They found that for a relatively low common resource capacity, the firm prefers to invest in service improvement rather than preservation technology.

Mishra [ 23 ] studied an EPQ problem considering uncertain and controllable deterioration rate. Following Day and Yang , Mishra et al. They established an EOQ model considering preservation investment, product deterioration, and two types of backordering scenarios. Li et al. High quality packaging helps to better preserve the products but leads to higher costs for sellers.

The goal is to minimize the total costs by choosing an appropriate packaging strategy.

Effects of dynamic pricing of perishable products on revenue and waste

Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: Abstract This paper deals with dynamic price strategies to reduce food and other perishable products spoilage. A deterministic mathematical model is proposed to study the influence of a number of factors, such as price elasticity of demand, age-sensitivity of demand and age profile of initial inventory, on revenue and spoilage. A parametric, bi-objective approach is considered with the aim of estimating the existing trade-offs between revenues and spoilage.


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University of Twente Student Theses

We present a literature review on quality and operations management problems in food supply chains. In food industry, the quality of the food products declines over time and should be addressed in the supply chain operations management. Managing food supply chains with operations management methods not only generates economic benefit, but also contributes to environmental and social benefits. The literature on this topic has been burgeoning in the past few years. Since , more than articles have been published on this topic in major operations research and management science journals.

Pricing Perishables

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Perishable products like dairy products, vegetables, fruits, pharmaceuticals, etc. Customers generally prefer the fresh products over aged ones, leading the perishable products to have a decreasing demand function with respect to their age. We analyze the inventory management and pricing decisions for these products, considering an age-and-price-dependent stochastic demand function. A stochastic dynamic programming model is developed in order to decide when and how much inventory to order and how to price these products considering their freshness over time. We prove the characteristics of the optimal solution of the developed model and extract managerial insights regarding the optimal inventory and pricing strategies.

Felix, P. More statistics for this item Repository Staff Only: item control page. University of Twente Student Theses. Data-driven retail food waste reduction : a comparison of demand forecasting techniques and dynamic pricing strategies.

Dynamic pricing is one of the most exciting topics in the pricing world right now, with digitalization providing many great opportunities for companies to be more responsive with their pricing. But despite its technological underpinnings, dynamic pricing requires strong human oversight directed by a clear strategy. This shift has been largely enabled by digitalization; data is becoming more richly available, processing power is increasing and new technologies like electronic price tags are emerging that make it much easier for companies to adjust prices quickly and effectively. Dynamic pricing can be located within a broader move towards customization and personalization with the emergence of data — companies now have the power to learn more about their customers and differentiate customer segments by price sensitivity, linking this insight with key market variables, such as supply and demand, timing and perishability. The potential of dynamic pricing is huge. Companies have newfound ways to maximize monetization, reduce waste and balance supply and demand. Dynamic prices allow businesses to respond more nimbly to market trends.

Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons

Xuanming Su, Full references including those not matched with items on IDEAS Most related items These are the items that most often cite the same works as this one and are cited by the same works as this one.

In order to attract customers, many retailers are offering a large number of perishable products. This allows them to compete against the more traditional channels that specialize in these items Adenso-Diaz et al. Li et al. Perishable products often require careful handling, and their limited shelf life requires the implementation of some sort of strategy that manages the spoilage of outdated units.

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