EOQ Models For Off-price Merchandise With Waiting Behavior Of Customers Under The Cross-selling

In recent years, the competition become more fierce in Chinese retail industry, andretail enterprises have to make full use of various marketing and means to attractcustomers and expand market share. Special sale promotion is one of the most commonmarketing methods in large supermarket or stores. Distributors attract customers bylaunching off-price merchandise which is related to people’s daily life and high demand inorder to reach the purpose of promoting other merchandise. Therefore, making reasonablejoint replenishment strategies of off-price merchandise and correlated merchandise hasthe importantly practical significance on operating decision of distributers.In paper, the concepts and basic methods of inventory control are stated, someresearch literatures involving cross-selling, partial backlogging and order or inventoryproblem of price discount have been analyzed, and some literature review conclusions areobtained.On the basis of previous inventory model which the partial backlogging is effectedon the selling price and waiting time of customers, considering the selling sales ofoff-price merchandise can promote the demand of correlated merchandise caused bycross-selling in its stock period, the basic EOQ model for off-price merchandise withwaiting behavior of customers under the cross-selling has been generated. The existentcondition of unique optimal solution and correlative management inspirations is analyzed.The effect of key parameters on ordering policy and average profit of distributors isanalyzed by simulation, such as price sensitivity factor. Then the above model has beenextended from two aspects. Firstly, considering the effect of the selling price, inventorylevel and advertising frequency on market demand rate of off-price merchandise, andoff-price merchandise become deteriorating, the order problem for off-price merchandisewith demand depends on selling price and stock under cross-selling has been researched,some management enlightenments and order strategies are given through theoretical andnumerical analysis. Secondly, considering the ordering cycle of off-price merchandiseand correlated merchandise is different, and off-price merchandise can be placed an orderfor many times, the joint replenishment decisions of off-price merchandise and correlatedmerchandise under cross-selling and an order for many times has been presented.It shows that:①In the model of the off-price merchandise and correlatedmerchandise have the same order cycle and the demand of off-price merchandise is constant, the selling price and the optimal time in stock of off-price merchandise have thereasonable intervals. When distributors launch the off-price merchandise, the increase ofoff-price merchandise’s selling price does not always increase its profit, and they need tosynthesize the profit of off-price merchandise and correlated demand caused bycross-selling.②In the model of two merchandises have the same order cycle, thedemand of off-price merchandise is connected with its selling price, inventory level andadvertising frequency, and off-price merchandise become deteriorating, if thedeteriorating rate increases and the increase range of purchase cost of off-pricemerchandise is greater than the decrease range of holding cost of correlated merchandise,distributors should set a high price of off-price merchandise. When initial demand ofoff-price merchandise and demand for advertising sensitive factor increases, distributorsshould shorten the available time and shortage of time. When demand for price sensitivefactor and advertising frequency increases, distributors should lengthen the available timeand shortage of time.③In the model of two merchandises have the different order cycle,that off-price merchandise can be placed an order for many times in a ordering cycle ofcorrelated merchandise, distributors can appropriately improve the service level to obtainhigher total average profit.