Ordering and pricing decisions of regular products in a supply chain with the effects of product-specific gift cards

Fast development and increasing popularity of gift cards motivates many retailers to offer such cards to their customers. This paper aims to examine the effects of gift cards and inflation on optimal ordering policy for regular products and to analyze the advantages of providing product-specific gift cards. Two models are proposed. In the first model, benefit function of retailer and supplier are considered separately and in the second model both of them are considered as a chain, and benefit function is optimized for a limited planning horizon. In this inventory system, the current value of the whole profit for the limited planning horizon is first modeled. Next, an algorithm is proposed for each model to obtain the optimal order for retailer and supplier, the value of discount for gift cards and the number of replacement retailer and supplier during the planning horizon. Eventually, we show our model through numerical examples and also report the sensitivity analysis to find some managerial insights.

Automated summary

The fast development and increasing popularity of gift cards have led many retailers to offer such cards to their customers. This paper examines the effects of gift cards and inflation on the optimal ordering policy for regular products and analyzes the advantages of providing product-specific gift cards. Two models are proposed and algorithms are used to obtain the optimal order and discount value. Numerical examples and sensitivity analysis are provided to showcase the model.