Continuous review inventory model with reducing lost sales rate under fuzzy stochastic demand and variable lead time

Hardik N. Soni and Kamlesh A. Patel

International Journal of Procurement Management, 2015, vol. 8, issue 5, 546-569

Abstract: The present study considers a continuous review inventory system for the inventory model involving fuzzy random demand, variable lead-time with lost-sales (backorder) caused by stock-out. Two forms of capital investment cost function viz. logarithmic and power are employed to reduce the lost-sales rate. We first formulate the basic model mathematically by assuming expected demand as triangle fuzzy number along with the capital investment to reduce lost-sales rate. As a result, the demand during lead-time is fuzzy random variable which is the linear sum of the weekly demand during the lead-time period. Consequently, the total weekly cost of this model is also fuzzy random in nature. Hence the expected total weekly cost is fuzzy valued function. To defuzzify the expected total weekly cost, we use the signed distance method. A computer program using the software MATLAB is developed to obtain the optimal solution and provide numerical examples to illustrate the models. Moreover, sensitivity analysis is carried out with respect to the key parameters.

Keywords: inventory modelling; fuzzy random variables; FRV; lost sales rate; variable lead times; procurement; continuous review; fuzzy stochastic demand; backorders; stockouts; capital investment; fuzzy logic. (search for similar items in EconPapers)
Date: 2015
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