AN INVENTORY MODEL UNDER INFLATION FOR STOCK DEPENDENT CONSUMPTION RATE ITEMS

Under inflation the assumption of constant unit price is not valid. The tendency in inflationary environment is to buy more in order to reduce the total system cost, which may be true in certain situations but it is not true when consumption rate of items is dependent on initial stock level since buying more quantity under inflationary environment leads to more consumption resulting in higher total system cost. The model developed in this paper helps to determine optimum ordering quantity for stock dependent consumption rate items under inflationary environment with infinite replenishment rate without permitting shortages. The results are illustrated with a numerical example. © 1990.