Optimal Policies for a Finite-Horizon Production Inventory Model
Read this article. The research indicates challenges associated with the timely ordering of products, especially those that can degrade with time. What kinds of challenges can you see with products that have a defined shelf life and can spoil or deteriorate?
Introduction
This paper is concerned with the optimality of a production schedule for a single-item inventory model with deteriorating items and for a finite planning horizon. The motivation for considering inventory models with time-varying demand and deteriorating items is well documented in the literature. Readers may consult Teng et al., Goyal and Giri, and Sana et al. and the references therein.
Earlier models on finding optimal replenishment schedule for a finite planning horizon may be categorized as economic lot size (ELS) models dealing with replenishment only. The model treated in this paper is an extension of the economic production lot size (EPLS) to finite horizon models and time-varying demand. The model is close in spirit to that of. However, in, the possibility that products may experience deterioration while in stock was not considered. Deterioration was considered in Sana et al. with the possibility of shortages. Nevertheless, their proposed (EPLS) schedule is not optimal.
Recently, Benkherouf and Gilding suggested a general procedure for finding the optimal inventory policy for finite horizon models. The procedure is based on earlier work by Donaldson, Henery, and Benkherouf and Mahmoud. This procedure was motivated by applications to (ELS) models. Nevertheless, it turned out that the applicability of the procedure goes beyond its original scope. The procedure has already been successful in finding the optimal inventory policy for an integrated single-vendor single buyer with time-varying demand rate: see Benkherouf and Omar. The current paper presents another extension of the procedure to (EPLS) models. In our treatment, we have opted for a route of simplicity. In that, we selected a model with no shortages and where costs are fixed throughout the planning horizon. Various extensions of the model are discussed in Section 5.
The details of the model of the paper along with the statement of the problem to be discussed are presented in the next section. Section 3 contains some preliminaries on the procedure of Benkherouf and Gilding. The main results are contained in Section 4. Section 5 is concerned with some general remarks and conclusion.