An analytical approach to optimising inventory with promotional strategies Academic Article in Scopus uri icon

abstract

  • This study extends the classical Economic Order Quantity (EOQ) model by examining the effects of the widely applied yet underexplored `Buy X Get Y Free¿ promotional strategy in inventory management. While such promotions are prevalent in retail and supply chain operations, their influence on inventory decisions remains insufficiently addressed in existing research. The proposed model analyses how this policy impacts key parameters, including optimal order quantities, total costs, and purchasing cycles. A mathematical framework is developed to address constraints such as promotional limits, operational expenses, and inventory holding costs. An exact solution approach is presented to determine the optimal order quantities across operational scenarios. The model offers clear guidelines on using these promotions to optimise inventory performance while minimising costs. A numerical example highlights how businesses can balance order size, cost savings, and inventory control. A sensitivity analysis explores how changes in demand rates, promotional thresholds, and cost structures impact outcomes. The findings reveal that `Buy X Get Y Free¿ promotions can enhance inventory performance by reducing costs and improving resource allocation. This study contributes to inventory theory literature by integrating such promotions into EOQ-based systems and proposing a structured solution for non-convex cost functions through an innovative optimisation procedure. © 2025 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

publication date

  • January 1, 2025