Inventory Policies for Non-instantaneous Deteriorating Items with Advance sales, Advertisement efforts and effect of Static Versus Dynamic Rebate

This paper presents study about the effects of rebates on an inventory model for non- instantaneous deteriorating items with preservation technology investments. Demand of the product is considered to be price-sensitive as well as affected by advertising efforts, advanced booking price discounts and rebates on price once deterioration starts. In the study, a three-phase model has been developed. The first phase is the production phase together with advance booking of the product at a discounted selling price. Second phase is the sales phase at a normal selling price and there is no deterioration of products in this phase. In the third phase products start deteriorating hence a price rebate is offered to the customers on purchase of the product. Effects of static versus dynamic rebates are studied. Aim of the paper is to obtain optimum cycle time, ordering quantity, selling price, amount of advertisement expenditures and amount of preservation expenditures in order to maximize total profit of the retailer. It is observed from the study that offering rebates in the deterioration phase helps retailers to increase demand that results to increase in total profit. By preservation technology investments retailers can reduce deterioration rate and hence he can generate more revenue.