Dynamic Pricing and Promotional Strategies while quantifying Type-I/II Errors and Logistics Emissions from Defect Returns in the Retail Industry

Abstract The existing framework investigates the optimal replenishment quantity for retailers by considering factors such as suboptimal quality items, imperfect inspection processes, promotional and pricing strategies, and sustainable inventory management. The model proposes a three-tier supply chain model comprising suppliers, retailers, and customers to study the inventory management problem with price-dependent demand. The methodology uses an analytical approach to optimize the expected total profit per unit time, considering the higher inspection rate compared to the demand rate to avoid shortages during the inspection period. The study demonstrates the feasibility of the proposed model and investigates the influence of critical parameters on the optimal replenishment policy through a numerical example and comprehensive sensitivity analysis. The research carried makes a significant contribution to the field of inventory management by introducing a novel model that considers the impact of price increase and order quantity on inventory management decisions, integrating eco-friendly measures into the supply chain that can contribute to long-term sustainability by tracking carbon emissions across various transit phases.