Extended Research on an Imperfect Process Production-inventory Model with Deteriorating Items under Two Dispatching Policies

Abstract

The First-In-First-Out (FIFO) and the Last-In-First-Out (LIFO) are the most general presumption policies of the inventory management. These presumptions are carefully considered in line with the actual practice of most business entities, especially when the merchandise or goods which have the deteriorating property affected by an imperfect production process. In this study, we firstly propose a production-inventory model for deteriorating items under an imperfect production process with FIFO inventory dispatching policy. Then, a closed-form solution of a near-optimal production uptime will be derived by utilizing Taylor series expansion of an exponential function. A numerical example is provided to argue the model’s fidelity. Also, a comparison with our previous research work-an LIFO policy production-inventory model is made. We conclude that when a deteriorating item is produced by an imperfect process, the LIFO inventory dispatch policy would be a better decision than the FIFO. Finally, sensitivity analysis is given to investigate the impacts that various parameters have in FIFO policy choice.