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132. Optimal Ordering Policies for Non-instantaneous Deterioration Items with Price and Stock Sensitive Demand under Inflation and Time Discounting

Invited abstract in session WA-49: Stochastic inventory systems, stream Lot Sizing, Lot Scheduling and Production Planning.

Wednesday, 8:30-10:00
Room: M1 (building: 101)

Authors (first author is the speaker)

1. Kuo-Lung Hou
Department of Marketing and Supply Chain Management, Overseas Chinese University
2. Li-Chiao Lin
Department of Business Administration, National Chinyi University of Technology

Abstract

In real life, such as fashionable commodities and high-tech products with short product life cycle, the length of the waiting time for the next replenishment is the main factor for deciding whether the backlogging with be accepted or not. On the other hand, such as seasonal items, first-hand vegetables, and fruits during the expiration period, there was no deterioration occurring immediately. In addition, several studies have shown that the impact of inflation on lot-sizing decision-making is often not negligible. We also noted that sales at the retail level tend to be proportional to the amount of inventory displayed. To reflect these phenomenon, this paper presents an inventory model for non-instantaneous deteriorating items with price- and stock-dependent demand under inflation and time value of money over a finite planning horizon. In the model, shortages are allowed and the unsatisfied demand is partially backlogged at the exponential rate with respect to the waiting time. We establish the theoretical results and provide an efficient solution procedure to find the optimal number of replenishment, the cycle time and selling price. Then the optimal order quantity and the total present value of profits are obtained. Finally, numerical examples are used to illustrate the proposed model. In addition, sensitivity analysis of the model parameters and some managerial insights are also discussed.

Keywords

Status: accepted

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