A deteriorating consigned vendor-buyer model with stock-, freshness- and dynamic price-dependent demand under space limitation

Availability of inventory is a crucial issue while adopting a consignment strategy. The issue becomes paramount when demand depends on stock. To address the issue, a one-vendor one-buyer model under consignment stock (CS) policy is addressed in this paper. Both the channel members are assumed to have space limitations in their respective warehouses. The display area for the buyer is also limited. The buyer receives the product from the vendor under consignment stock policy, and transfers it in small batches to the display area. The market demand is affected by the price, freshness and on-hand stock level. Price is assumed to be dynamic in order to accurately depict real-world scenarios and to exhibit its important role in driving demand and influencing other decision-making factors. This study derives the optimal decisions to maximize the total profit of the supply chain system. Numerical experiments illustrate the optimal strategies such as production rate, shipment sizes, warehouse space limit, and number of shipments. Managerial insights are provided to establish the applicability of the model.