Authors: Yang Tan; Michael X. Weng
Addresses: Pricing Science and Engineering Department, FedEx Express World Headquarters, 3640 Hacks Cross Road, Memphis, TN 38125, USA. ' Department of Industrial and Management Systems Engineering, University of South Florida, 4202 E. Fowler Avenue, Tampa, FL 33620, USA
Abstract: A new inventory control system with a constant rate of customer demand is studied. Any physical inventory experiences a constant rate of deterioration and any unsatisfied demand is completely backlogged. Time is treated as a discrete variable, whereas a practical point of view is taken into account by allowing the time at which the physical inventory level goes to zero to be a non-integer. A closed-form equation is derived to compute the optimal solution, while no closed-form solution was presented in literature. This greatly reduces the computational efforts and makes sensitivity analysis possible. Some very useful insights are provided into sensitivity analysis.
Keywords: inventory control; deteriorating items; trapezoid method; sensitivity analysis; inventory modelling; backlogging.
International Journal of Services Operations and Informatics, 2012 Vol.7 No.1, pp.37 - 51
Available online: 30 Aug 2012 *Full-text access for editors Access for subscribers Purchase this article Comment on this article