Inspection policy for inventory system with deteriorating products

Allen H. Tai, Yue Xie and Wai-Ki Ching

International Journal of Production Economics, 2016, vol. 173, issue C, 22-29

Abstract: Typical inventory models usually focus on screening out the deteriorating items, not much attention is paid to the situation that a proportion of deteriorated items are sold to consumers together with serviceable items during a replenishment cycle. This paper first presents a model to formulate the process of such kind of mixed sales. A simple closed-form solution is obtained for maximizing the net profit per unit time under the assumption of small deterioration rate. The effect of shortage back-ordering is then considered and closed-form solutions of optimal ordering quantity and replenishment time are obtained under similar assumption. We further study the effect of inspection policies on optimal decisions for a deteriorating inventory system. A dynamic programming approach is proposed for solving the optimal policy. Numerical examples are then provided to demonstrate our conclusions and results.

Keywords: Back-ordering; Deteriorating items; Dynamic programming; Inspecting policy; Ordering quantity; Replenishment time (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:173:y:2016:i:c:p:22-29

DOI: 10.1016/j.ijpe.2015.11.018

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