Optimal start time of a markdown sale under a two‐echelon inventory system

• DOI: 10.1111/itor.12746
• Publication Date: 2019-11-01T12:50:01Z
• Authors: Youngchul Shin; Chang Seong Ko; Ilkyeong Moon
• Keywords: Newsvendor model

Abstract The importance of inventory management for perishable items has been steadily attracting attention. Because the characteristics whose values drop precipitously or cannot be sold after a particular time, should disposed by markdown sale. Accordingly, company makes following decisions at end selling season: (a) selection on which products to discounted, (b) pricing product, and (c) timing Extant literature problem mainly focused investigating selecting discount amount discount. That is, decision start time sale was not extensively studied. This study focuses optimal combination an order quantity based newsvendor model. Under certain conditions in decentralized system, sale, where retailer obtains highest profit, is least profitable manufacturer. Therefore, we propose revenue‐sharing contract avoid irrational ordering behavior against Centralization through improves profits manufacturer compared those earned system.