A finite time horizon EOQ model with ramp-type demand rate under inflation and time-discounting

Abstract

An economic order quantity (EOQ) inventory problem is discussed over a finite time for deteriorating items with shortages, where the demand rate is of the ramp-type. It is assumed that a constant fraction of the on-hand inventory deteriorates per unit time. The time-value of money and the effects of inflation are taken into account, considering two separate inflation rates: the internal (within the company) and the external (in general economy) inflation rates. The optimality condition for the cost function is analysed and established. The numerical solutions of the model are obtained by considering shortage and no shortage in inventory. Also, we compare this model with infinite time-horizon model. The sensitivity of the parameters involved in the model is also examined. Finally, some concluding remarks are made to highlight the importance of the present work.