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

Abstract

This paper develops a finite time-horizon deterministic economic order quantity (EOQ) inventory model for deteriorating items. The items deteriorating at a constant rate and the demand at any instant depends on the on-hand inventory (stock-level) at that instant, shortages are allowed and completely backordered and the effects of inflation and time-value of money are taken into consideration. The proposed model facilitates managers in determining the optimal number of replenishments and optimal reorder time point. The results are discussed with two numerical examples and a sensitivity analysis of the optimal solution with respect to parameters of the system is carried out.