A new up-to level inventory model for deteriorating products with non-linear holding cost

Abstract

Inventory management of deteriorating items faces major challenges by uncertain demand, uncertain lead time, perishability, and high customer service level requirements. So, this issue is extremely important in many corporations today. The periodic up-to level policy for deteriorating products under stochastic demand and stochastic lead time is not paid enough attention up to now. In this paper we propose a new approach to study inventory up-to level policy of deteriorating products under normal distributed demand and lead time by considering service level requirements. To model deterioration process, a non-linear increasing holding cost function is considered. After developing the mathematical model, a solving procedure is proposed to determine the global optimum value of decision variables. Finally, a sensitivity analyses is done to demonstrate the applicability and validity of the proposed model.