Abstract
This paper develops an Economic Order Quantity (EOQ) model for non-instantaneous deteriorating items with selling price- and inflation-induced demand under the effect of inflation and customer returns. The customer returns are assumed as a function of demand and price. Shortages are allowed and partially backlogged. The effects of time value of money are studied using the Discounted Cash Flow approach. The main objective is to determine the optimal selling price, the optimal length of time in which there is no inventory shortage, and the optimal replenishment cycle simultaneously such that the present value of total profit is maximized. An efficient algorithm is presented to find the optimal solution of the developed model. Finally, a numerical example is extracted to solve the presented inventory model using the proposed algorithm and the effects of the customer returns, inflation, and non-instantaneous deterioration are also discussed. The paper ends with a conclusion and outlook to future studies.
Highlights
In the last decade, the ination and time value of money ruin the global economy
Here, we considered a price- and inflation-dependent demand function
The results confirm that when the discount rate of inflation decrease, the purchasing power will be raised, which will lead to an enhancement in order quantity
Summary
Department of Industrial Engineering Karazmi University, Mofatteh Avenue, Tehran, Iran Institute of Applied Mathematics Middle East Technical University, Ankara, Turkey Department of Industrial Engineering Tarbiat Modares University (TMU), Tehran, Iran (Communicated by Victor Sreeram)
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