Optimal Ordering Policies for Supermarkets under Static Pricing and Stochastic Demand: A Case Study of Milk Powder Product
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Date
2013
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal of Scientific Research Engineering & Technology
Abstract
Demand uncertainty affects a significant portion of sales revenue in supermarkets. In this paper, we develop a new approach to
formulate and optimize the single-item, finite horizon, periodic review revenue problem of milk powder product under stochastic
demand. A special case of our model is where sales price and scheduled inventory replenishment periods are uniformly fixed at all supermarkets. Adopting a Markov decision process approach, the states of a Markov chain represent possible states of demand
for milk powder product. The decision of whether or not to order additional units is made using dynamic programming over a
finite period planning horizon. Numerical results demonstrate the existence of an optimal state-dependent ordering policy and the
corresponding sales revenue of milk powder product in supermarkets.
Description
Keywords
Optimization, ordering policies, static pricing, stochastic demand
Citation
Mubiru, K. P., KarikoBuhwezi, B., & Lating, P. O. Optimal Ordering Policies for Supermarkets under Static Pricing and Stochastic Demand: A Case Study of Milk Powder Product.