AN ORDER-LEVEL LOT-SIZE INVENTORY MODEL FOR DETERIORATING ITEMS WITH FINITE REPLENISHMENT RATE

Inventory models have been written for many systems, but most of them assumed that inventory items maintain their original value over their storage period. In actual practice, values of many items may perish over time. For example, grains decay as time progresses. For such items, the effect of decaying or deterioration should be taken into consideration. Another assumption made in many inventory models is that replenishment rate is infinite. However, when an item can be produced in-house, the replenishment rate is also the production rate, and is hence finite. This paper derives a production model for the lot-size, order-level inventory system with finite production rate, taking into consideration the effect of decay. The objective is to minimize total cost by selecting the optimal lot size and order level. The derived model cannot be solved directly; a computer search algorithm is used to obtain the optimal lot size and order level. Numerical examples are shown at the end of the paper to illustrate the derived model.