Economic ordering policy for single item inventory model over finite time horizon

Abstract

This paper deals with an economic order quantity (EOQ) model for non-instantaneous deteriorating items in which the demand is a deterministic function of selling price and advertisement cost under the effect of inflation and time value of money over a finite planning horizon. In addition, a permissible delay in payment within the cycle time is offered by the supplier as an alternative to price discount. Finite replenishment rate is considered. Two different scenarios are considered here, that is, shortages are not permitted in scenario-I and shortages are permitted with partial backlogging in scenario-II. The objective of this work is to minimize the total inventory cost and to find the optimal length of replenishment and the optimal order quantity. Theoretical approaches described for the proposed scenarios are studied with the help of numerical examples. Sensitivity analysis for the major parameters of the inventory system is made and the managerial implications are given. Comparison of various results obtained for the two scenarios are studied and analyzed in detail.