EURO 2024 Copenhagen
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89. Optimizing Profit and Minimizing Waste: A Bi-Objective Dynamic Programming Model for Inventory Control and Pricing of Perishable Products

Invited abstract in session TD-50: Omni-Channel Retailing , stream Retail Operations.

Tuesday, 14:30-16:00
Room: M2 (building: 101)

Authors (first author is the speaker)

1. Melda Hasiloglu Ciftciler
2. Onur Kaya
Industrial Engineering, Eskisehir Technical University

Abstract

When considering the prevention of food waste, it is worth examining the strategies of perishable food retailers. Inventory management and sale price strategies of perishable food products are essential for retailers to maximize profit and minimize food waste. In our study, we examine the challenge faced by a retailer who simultaneously sells a single type of food product with different ages (old and new), allowing for demand shifts between these products based on sale prices and consumer behaviors. We develop a bi-objective dynamic programming model and find the optimal discounted price, sale price and order quantity of food products to maximize the retailer’s profit and minimize food waste. We formulate four commonly practised static and dynamic pricing policies and quantify the advantage of dynamic pricing and price differentiation between old and new products by considering both profit and waste. Our findings indicate that significant improvements can be obtained by dynamically determining the order quantity and the old product’s sale price, considering the current inventory at hand. Moreover, for our bi-objective function, we use the weighted-sum method and we analyze the results of different weight combinations of profit and waste in the objective function. The findings emphasize the significance of waste and sustainability issues, highlight the balance between waste and profit, and offer valuable insights to companies aiming to enhance their system results.

Keywords

Status: accepted

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