An Inventory Model for Deteriorating Items with Stochastic Demand, Variable Lead Time and Shortages, Considering Inflation and Time Value of Money

December 9, 2014 Posted by admin

Gabriel O. Akanbi and Obafunmilola O. Fagade
Department of Industrial and Production Engineering, Faculty of Technology,
University of Ibadan, Nigeria

Abstract
The term inventory refers to idle resources that have economic values. Optimal control of inventory enhances competitiveness and profitability of a company. Mathematical models have been developed to describe various scenarios obtainable in the management of inventories. These models usually have the aim of minimizing inventory costs. In this work, we formulate an inventory model to determine optimal order quantity and re-order level for deteriorating items in an inflationary economy having stochastic demand and non-instantaneous replenishment. The solution of the model obtained determines the optimal replenishment schedule that minimizes total inventory costs. To evaluate the usefulness of the model, the procedure was applied to a real life inventory problem in a food processing company. The result obtained with the proposed policy was then compared with the present policy in the company.

Keywords: inventory model, deteriorating items, lead time, inflation.

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