An Optimal Replenishment Policy for Seasonal and Deteriorating Items

This study discusses the retailer’s optimal replenishment policy for products with a seasonal demand pattern. The demand of seasonal merchandise such as clothes, sporting goods, children’s toys and electrical home appearances tends to decrease with time. In this study, we focus on “Special Display Goods”, which are heaped up in end displays or special areas at the retail store. They are sold at a fast velocity when their quantity displayed is large, but are sold at a low velocity if the quantity becomes small. Most of physical items undergo decay or deterioration over time. We also consider the case where the inventory level is continuously depleted due to the combined effects of its demand and deterioration. We develop the model with a finite time horizon (period of a season) to determine the optimal replenishment policy, which maximizes the retailer’s total profit. Numerical examples are presented to illustrate the theoretical underpinnings of the proposed model.