Economic Order Quantity Model for Deteriorating Items under Inflation with Time Dependent Demand and Partial Backlogging

Abstract

: One of the basic assumptions in the derivation of the classical Economic Order Quantity (EOQ) formula was that all the costs associated with the inventory system remain constant over time. Most of the inventory models developed so far do not include inflation. Today, inflation has become an unavoidable feature of the economy of almost all countries of the world and so several attempts have been made by researchers to reformulate the optimal inventory management policies taking into account inflation. The first attempt in this direction was by Buzacott [1]. Immediately, many other researchers have tried to extend Buzacott’s approach to several other interesting situations taking into account the different inflation rates for the internal and external costs, infinite and finite replenishment rates, with or without shortages etc. The present paper deals with a finite time-horizon inventory replenishment model with time dependent demand for items deteriorating at a constant rate. The effects of inflation are incorporated along with shortages which are assumed to be partially backlogged. The results obtained are illustrated with numerical examples and a sensitivity analysis of the optimal solution with respect to some important parameters of the system have been presented.