Inventory model for seasonal demand with option to change the market

In real life, when bulk purchase becomes convenient or even mandatory, it is a common practice for distributors to explore an alternative market in order to maximize the revenue earned. In this paper, we consider an inventory model for a product having seasonal demand with two potential markets, say, primary and alternate. The distributor has a single opportunity of procurement prior to multiple demand seasons in the primary and the alternate market. Both the markets have similar demand patterns, with time lag between their demand seasons. The demand is a price and time dependent function with increasing, constant and declining phases within each demand season. The scale parameter of demand rate depends upon the market. In each market, successive seasons are separated by random time. In one replenishment cycle, the distributor has a single option to exit the primary market by transferring the inventory, with or without change in selling price. This option can be exercised at the end of any complete season at the primary market. Our investigations indicate that it will be beneficial for the distributor to shift to the alternate market even at a slightly lower selling price if demand rate in the alternate market is higher. Optimal number of seasons at the primary market before change of price or market is obtained. Optimal policy is obtained for jointly determining the order quantity and price. Concavity of the profit function is discussed. Solution procedure, numerical examples and sensitivity analysis are presented.

Research highlights
► Two potential markets with Demand seasons concurrent or otherwise.
► In each market--Multiple demand seasons, Random inter season time.
► Bulk purchase, single option of changing the market and/or selling price.
► Three phase PLC type seasonal demand, sudden drop in demand possible in third phase.
► Selling price/demand rate in the either market can be higher.