Finally, the first acceptance of 2011 comes.

An optimal replenishment policy for deteriorating items with effective investment in preservation technology

Chung-Yuan Dye and Tsu-Pang Hsieh

Abstract

In this paper, considering the amount invested in preservation technology and the replenish- ment schedule as decision variables, we formulate an inventory model with a time-varying rate of deterioration and partial backlogging. The objective is to find the optimal replenishment and preservation technology investment strategies while maximizing the total profit per unit time. For any given preservation technology cost, we first prove that the optimal replenishment schedule not only exists but is unique. Next, under given replenishment schedule, we show that the total profit per unit time is a concave function of preservation technology cost. We then provide a simple algorithm to figure out the optimal preservation technology cost and replenishment schedule for the proposed model. We use numerical examples to illustrate the model.

Key words: inventory, deterioration, partial backlogging, preservation technology investment Tags: 3Q, Teaching

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