Dynamic Economic Lot Size Model with Perishable Inventory

Abstract

This paper considers an economic lot size (ELS) model for perishable products where an inventory stock's deterioration rate and its carrying cost in each period depend on the age of the stock. We discuss situations where the traditional ELS models are not applicable, and propose a new model with general concave production and inventory cost functions. We explore the structural properties of the optimal solutions and use them to develop a dynamic programming algorithm which solves the problem in polynomial time. We also consider special cases of the general model which are solvable with reduced computational complexities.