A study of markdown policy in Aggregate Production Planning environment by developing a APP-MP model

It is believed that the information sharing and cooperation between the retailer and the manufacturer become important now for improving their performance. This paper is to study the significance of the cooperation between the markdown policy and the aggregate planning so as to simulate the cooperation between retailers and manufacturers by a new model, Aggregate Production Planning-Markdown Pricing Model (APP-MP) which is established by integrating the markdown model into Aggregate Production Planning model. The APP-MP is a nonlinear integer programming model which is able to help the retailer and the manufacturer simultaneously make the pricing decisions, including the magnitude and time of markdown, and operational decisions so that greater profits could be obtained. The example solution shows that the cooperation definitely increases the profits. This paper’s result also implies that, instead of holding the belief “selling more and earning more”, the retailer could cooperate with manufacturer to plan the production and earns more.