An optimal replenishment policy for items with inventory-level-dependent demand and fixed lifetime under the LIFO policy

Abstract

In a recent paper, Hwang and Hahn considered inventory replenishment problems for an item with an inventory-level-dependent demand rate and a fixed lifetime. They developed an EQQ model under the situation of considering the first-in–first-out (FIFO) issuing policy. First, this paper reconsiders Hwang and Hann's problem by employing the last-in–first-out (LIFO) issuing policy, which is more practical in the retail industry. An inventory model is developed. Secondly, the concavity of the objective function is proved. Thirdly, this paper presents conditions where the present model has a unique optimal solution and a method for finding the global optimal solution. A simple solution procedure and sensitivity analyses of parameters are also provided.

Keywords:

• inventory
• inventory-level-dependent demand rate
• fixed product lifetime

Acknowledgements

We thank the editors and anonymous referees for their valuable comments and suggestions, which have greatly improved the paper. This research was supported by the Natural Science Fund of China under Grant numbers 79970058 and the NSF of Anhui Province under Grant number 01046104.