A New Dynamic Pricing Model for the Effective Sustainability of Perishable Product Life Cycle

Abstract

Perishable products run their life cycle in a short period of time due to the shortness of their shelf lives. Product efficiency falls when especially non-recyclable products are thrown away without being used. Furthermore, this kind of products that unnecessarily occupy shelves of supermarkets cause supermarkets to follow an insufficient stock management policy. Unconscious and unplanned use of our limited natural resources will deteriorate the product portfolio for future generations. Such unconscious production and consumption patterns will disrupt natural balance and damage sustainability of products. In addition to creating very high costs for producers, sellers and consumers alike, these unsold or stale products lead to environmental problems due to such pricing policies. In other words, although the products have to be thrown away without being sold is attributed by many managers to be attributable to the unplanned over-orders, the actual reason is something else. The real contributor of the problem is changing purchase attitudes of customers because of wrong pricing policies of wholesaler. In addition, limited resources are also consumed fast and in unnecessary amounts. The imbalance in respect to the sustainability of these products leads to increase in the production costs, procurement costs and failure to achieve balance among products to be kept in storage houses as some of the products occupy stocks unnecessarily. In the present study, a new pricing policy is developed for product stock whose shelf lives are about to expire and generally become waste to increase salability of these products in reference to fresher stocks of these products. The present study, which is designed to reduce the above-mentioned losses, will seek to minimize the cost of waste, maximize the profit earned by supermarkets from the product, maximize product utilization rates and ensure sustainability of products and stocks as well. Fulfillment of these objectives will increase productivity and enhance the significance of product efficiency and nature-friendly attitudes.

Effective Pricing of Perishables for a More Sustainable Retail Food Market

“…Numerous earlier studies have focused on showing the benefits of implementing dynamic pricing for perishables [9][10][11][12][13][14][15][16][17][18][19][20][21][22]. Past studies using a deterministic simulation showed that inventory aging of perishable foods can be reduced by applying various dynamic pricing strategies [25]. Past studies using consumer need-driven demand scenarios showed that more dynamic pricing and earlier discount can enhance the sales volume, reduce wastage, and inventory aging when consumers' requirement regarding remaining days left follow normal distribution and retailers can accurate measure average demand or the target stock amount exceeds average demand [5,27].…”

“…They investigated the optimal timing and discount rate and replenishment policy for aged perishable products. Tekin and Erol [25] developed a new dynamic pricing for perishable foods with a short selling period. They analyzed interactions among price, profitability, and cost in detail using a deterministic simulation model.…”

“…Studies have also considered strategic consumer demand to develop an optimal dynamic pricing for perishable products [13][14][15][16][17]. The models developed in these studies are focused on general perishable products, and earlier studies have also focused on developing pricing and inventory models for perishable foods [18][19][20][21][22][23][24][25][26]. These studies used stochastic consumer demands such as myopic, strategic, and price-dependent demand assumptions, which have not considered the realistic situation when consumers actually purchase perishable foods.…”

Joint Decision Model of Group Ticket Booking Limits and Individual Passenger Dynamic Pricing for the High-Speed Railway

“…In the last 20 years, there have been many achievements in dynamic pricing considering multiple products, competition, and limited demand information, under the three basic assumptions of finite time horizon, finite amount of inventory, and dynamic pricing [9]. With regard to the perishable product life cycle, Tekin and Erol proposed a dynamic pricing model to maximize the profits of supermarkets and product utilization rates [10].…”

“…Therefore, let u ∈ [0, 1] be the control decision of group booking; when the group order is rejected u = 0, otherwise u = 1. The booking limit for group orders is dependent on Equation (10).…”