Dynamic pricing and inventory control with delivery flexibility

We study a multi-period inventory system with price-sensitive demand and uncertain supplier, focusing on the advantage of delivery flexibility. The optimal pricing and inventory replenishment decisions are explored. We also investigate the changes of marginal profit, optimal order quantities and optimal prices over time horizon with additive demand noise. By comparing our system with delivery flexibility with the other two traditional systems numerically in different scenarios, we show that the delivery flexibility can improve the total profit and mitigate the supply risk.

Automated summary

We study a multi-period inventory system with price-sensitive demand and uncertain supplier, and explore the advantage of delivery flexibility. By comparing our system with traditional systems numerically, we show that delivery flexibility can improve total profit and mitigate supply risk.