Ordering Quantity Decisions for Deteriorating Inventory Systems

Abstract

Due to inherent characteristics of products, items are subject to lose their value or usability overtime. A perishable inventory system has received increasing attentions in the past years. An optimal ordering policy for deteriorating inventory system has become more and more important. This paper has focused on the fixed life time and continuous review (Q, r) perishable inventory systems with a positive lead time. A method to determine the optimal order quantity that minimizes the total expected cost for perishable items is developed. The results indicate that the expected cost function is convex in ordering quantity. The solution methodologies to obtain the optimal policy are presented. Moreover, the results of sensitivity analysis show that the relationships between the holding costs, outdating costs, and ordering costs, and the demand with the optimal ordering quantity are varied.