Title: A discrete-in-time inventory model with deterioration and backlog

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.

DOI: 10.1504/IJSOI.2012.048805

International Journal of Services Operations and Informatics, 2012 Vol.7 No.1, pp.37 - 51

Available online: 30 Aug 2012 *

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