Deterministic models of perishable inventory with stock-dependent demand rate and nonlinear holding cost

This paper deals with an extended EOQ-type inventory model for a perishable product where the demand rate is a function of the on-hand inventory. The traditional parameters of unit item cost and ordering cost are kept constant; but the holding cost is treated as (i) a nonlinear function of the length of time for which the item is held in stock, and (ii) a functional form of the amount of the on-hand inventory. The approximate optimal solution in both the cases are derived. Computational results are presented indicating the effects of nonlinearity in holding costs.     

An inventory model for deteriorating items with stock-dependent demand rate

This paper discusses an inventory model with an inventory-level-dependent demand rate followed by a constant demand rate for items deteriorating at a constant rate θ, where the terminal condition of zero inventory at the end of the scheduling period has been relaxed. Sensitivity of the decision variables to changes in the parameter values is examined and the effects of these changes on the optimal policy are discussed in brief.     

Profit maximization in an inventory system with time-varying demand,partial backordering and discrete inventory cycle

In this paper, an inventory problem where the inventory cycle must be an integer multiple of a known basic period is considered. Furthermore, the demand rate in each basic period is a power time-dependent function. Shortages are allowed but, taking necessities or interests of the customers into account, only a fixed proportion of the demand during the stock-out period is satisfied with the arrival of the next replenishment. The costs related to the management of the inventory system are the ordering cost, the purchasing cost, the holding cost, the backordering cost and the lost sale cost. The problem is to determine the best inventory policy that maximizes the profit per unit time, which is the difference between the income obtained from the sales of the product and the sum of the previous costs. The modeling of the inventory problem leads to an integer nonlinear mathematical programming problem. To solve this problem, a new and efficient algorithm to calculate the optimal inventory cycle and the economic order quantity is proposed. Numerical examples are presented to illustrate how the algorithm works to determine the best inventory policies. A sensitivity analysis of the optimal policy with respect to some parameters of the inventory system is developed. Finally, conclusions and suggestions for future research lines are given.

     

A variable holding cost rate EOQ model

This paper presents a modification to the classical EOQ formula, which takes into account the disproportionate change in cost that may be incurred in holding stocks, as the average value of the stock held increases. A revised formula is derived, and this is illustrated with an example. The implications of this modification on the total cost are discussed.     

A two-echelon inventory model for a deteriorating item with stock-dependent demand,partial backlogging and capacity constraints

This study investigates a two-echelon supply chain model for deteriorating inventory in which the retailer’s warehouse has a limited capacity. The system includes one wholesaler and one retailer and aims to minimise the total cost. The demand rate in retailer is stock-dependent and in case of any shortages, the demand is partially backlogged. The warehouse capacity in the retailer (OW) is limited; therefore the retailer can rent a warehouse (RW) if needed with a higher cost compared to OW. The optimisation is done from both the wholesaler’s and retailer’s perspectives simultaneously. In order to solve the problem a genetic algorithm is devised. After developing a heuristic a numerical example together with sensitivity analysis are presented. Finally, some recommendations for future research are presented.     

Two-warehouse production model for deteriorating inventory items with stock-dependent demand under inflation over a random planning horizon

This paper develops a production-inventory model for a deteriorating item with stock-dependent demand under two storage facilities over a random planning horizon, which is assumed to follow exponential distribution with known parameter. The effects of learning in set-up, production, selling and reduced selling is incorporated. Different inflation rates for various inventory costs and time value of money are also considered. A hybrid genetic algorithm is designed to solve the optimization problem which is hard to solve with existing algorithms due to the complexity of the decision variable. To illustrate the model and to show the effectiveness of the proposed approach a numerical example is provided. A sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out.     

An inventory model for deteriorating items with stock-dependent consumption rate and shortages under inflation and time discounting

This paper derives an inventory model for deteriorating items with stock-dependent consumption rate and shortages under inflation and time discounting over a finite planning horizon. We show that the total cost function is convex. With the convexity, a simple solution algorithm is presented to determine the optimal order quantity and the optimal interval of the total cost function. The results are discussed with a numerical example and particular cases of the model are discussed in brief. A sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out.     

Stability of equilibrium points of demand-inventory model with stock-dependent demand

A model of demand and inventory of a product in one echelon of supply chain is considered. The model is formulated as a system of difference equations, in which every equilibrium point is nonhyperbolic. A positive invariant set of the system is constructed. An analysis of properties of equilibrium points of the system is based on the Lyapunov method or reducing it to the family of systems of difference equations with hyperbolic equilibrium points.     

A partial replenishment model for an inventory with constant demand

An inventory with constant demand is considered. The inventory is checked according to a Poisson process and replenished either fully or partially when the stock is below a threshold. We obtained the stationary distribution of the level of the inventory. After assigning several costs to the inventory, we also derived the long-run average cost per unit time. A numerical example is studied to find the optimal values of the checking rate and threshold, which minimize the long-run average cost.     

The capital cost of holding inventory with stochastically mean-reverting purchase price

Most models of inventory control assume that the per unit purchase price is constant. The capital cost of holding inventory can then be taken into account by adding a fixed interest rate, r, times the purchase price, C, to the out-of pocket holding cost. However, it is not uncommon that the purchase price varies over time. How the capital cost then should be calculated is the focus of the present paper. The paper studies the common single-item inventory model with a fixed set-up cost and assumes that the stochastic purchase price follows the mean-reverting Ornstein–Uhlenbeck process. Methods for computing an adjusted interest rate, r, are suggested along with modifications of well-known heuristics and formulas for lot-sizing. Simulation tests, where the optimal policy has been compared to policies obtained using modified versions of the Silver–Meal method, the Part Period algorithm and the EOQ formula, suggest that r should be estimated as the sum of the unadjusted interest rate and the average expected purchase price decrease, measured over a period between 1/3 and 2/3 of the length of the order cycle.     

On inventory problems with arbitrary cost pattern,demand pattern and demand distribution

A detailed analysis of inventory models without setup costs, arbitrary demand distribution and arbitrary demand and cost pattern is given. First it is shown that the corresponding one-period model without ordering costs may be reduced to another simpler one with appropriately modified demand distribution. Several representations are given for the modified demand distribution. As one of the main results this reduction turns out to be robust in most cases. In a final chapter the results are applied to the determination of an optimal policy for a class of N-period inventory models with convex holding-and shortage costs and without setup costs.     

An economic production quantity inventory model involving fuzzy demand rate and fuzzy deterioration rate

Generally, in deriving the solution of economic production quantity (EPQ) inventory model, we consider the demand rate and deterioration rate as constant quantity. But in case of real life problems, the demand rate and deterioration rate are not actually constant but slightly disturbed from their original crisp value. The motivation of this paper is to consider a more realistic EPQ inventory model with finite production rate, fuzzy demand rate and fuzzy deterioration rate. The effect of the loss in production quantity due to faulty/old machine have also been taken into consideration. The methodology to obtain the optimum value of the fuzzy total cost is derived and a numerical example is used to illustrate the computation procedure. A sensitivity analysis is also carried out to get the sensitiveness of the tolarance of different input parameters.     

An inventory model where backordered demand ratio is exponentially decreasing with the waiting time

We analyze an inventory system with a mixture of backorders and lost sales, where the backordered demand rate is an exponential function of time the customers wait before receiving the item. Stockout costs (backorder cost and lost sales cost) include a fixed cost and a cost proportional to the length of the shortage period. A procedure for determining the optimal policy and the maximum inventory profit is presented. This work extends several inventory models of the existing literature.     

Inventory of damagable items with variable replenishment rate,stock-dependent demand and some units in hand

Items made of glass, ceramics, etc., break/get damaged during the storage due to the accumulated stress of heaped stock. For the first time, a deterministic inventory model of such a damagable item is developed with variable replenishment when both demand and damage rates are stock-dependent in polynomial form. Here replenishment rate for the first cycle is partly instantaneous and partly varies with demand. For the next cycle, the variable replenishment is augmented when the inventory level falls to Q₀, the instantaneous replenishment amount for the first cycle. After this, the cycle repeats itself. The amount, Q₀ is also here varied and the optimum Q₀ and Q (inventory level) are evaluated following the profit maximization principle in integral form. The model is illustrated numerically and sensitivity analyses are presented.     

A deterministic inventory/production model with general inventory cost rate function and piecewise linear concave production costs

We present a thorough analysis of the economic production quantity model with shortages under a general inventory cost rate function and piecewise linear concave production costs. Consequently, an effective solution procedure, particularly useful for an approximation scheme, is proposed. A computational study is appended to illustrate the performance of the proposed solution procedure.     

On an inventory model for deteriorating items and time-varying demand

In this paper, we present an optimal procedure for finding the replenishment schedule for the inventory system in which items deteriorate over time and demand rates are increasing over a known and finite planning horizon.     

Note: An application of the EOQ model with nonlinear holding cost to inventory management of perishables

In this note, we consider a variation of the economic order quantity (EOQ) model where cumulative holding cost is a nonlinear function of time. This problem has been studied by Weiss [Weiss, H., 1982. Economic order quantity models with nonlinear holding costs. European Journal of Operational Research 9, 56–60], and we here show how it is an approximation of the optimal order quantity for perishable goods, such as milk, and produce, sold in small to medium size grocery stores where there are delivery surcharges due to infrequent ordering, and managers frequently utilize markdowns to stabilize demand as the product’s expiration date nears. We show how the holding cost curve parameters can be estimated via a regression approach from the product’s usual holding cost (storage plus capital costs), lifetime, and markdown policy. We show in a numerical study that the model provides significant improvement in cost vis-à-vis the classic EOQ model, with a median improvement of 40%. This improvement is more significant for higher daily demand rate, lower holding cost, shorter lifetime, and a markdown policy with steeper discounts.     

An inventory model of deteriorating items with lot-size dependent replenishment cost and a linear trend in demand

This paper presents an inventory model for deteriorating items over a finite time horizon where the demand increases linearly with time. The method is developed by assuming that the successive replenishment cycle lengths are the same. Many O.R. scientists/researchers obtained an optimal replenishment schedule where the replenishment cost is constant in each cycle length over the finite time horizon. In this paper, we relax the assumption of fixed replenishment cost. The replenishment cost per replenishment is taken to be linearly dependent on the lot-size of that replenishment. Shortages are allowed and are fully backlogged. As a special case, the results for the model without shortages are derived. Finally, two numerical examples are presented to illustrate the model.     

Stochastic inventory problem with piecewise quadratic holding cost function containing a cost-free interval

In this paper, we consider a periodic-review stochastic inventory model with an asymmetric or piecewise-quadratic holding cost function and nonnegative production levels. It is assumed that the cost of deviating from an ideal production level or existing capacity is symmetric quadratic. It is shown that the optimal order policy is similar to the (s, S) policies found in the literature, except that the order-up-to quantity is a nonlinear function of the entering inventory level. Dynamic programming is used to derive the optimal policy. We provide numerical examples and a sensitivity analysis on the problem parameters.This research was supported by the Natural Sciences and Engineering Research Council of Canada under Grant No. A5872. The authors wish to thank an anonymous referee for very helpful comments on an earlier version of this paper.     

On a stochastic inventory model with a generalized holding costs

This paper is concerned with finding the optimal replenishment policy for an inventory model that minimizes the total expected discounted costs over an infinite planning horizon. The demand is assumed to be driven by a Brownian motion with drift and the holding costs (inventory and shortages) are assumed to take some general form. This generalizes the earlier work where holding costs were assumed linear. It turns out that problem of finding the optimal replenishment schedule reduces to the problem of solving a Quasi-Variational Inequality Problem (QVI). This QVI is then shown to lead to an (s, S) policy, where s and S are determined uniquely as a solution of some algebraic equations.