A study of deteriorating EOQ model with stochastic demand and fixed shelf-lifetime

• Main Authors: Hung-Chien Cho, 卓建宏
• Other Authors: Chiang-Sheng Lee
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/q7ex9z

碩士 === 國立臺灣科技大學 === 工業管理系 === 106 === This paper deals with two specific inventory models for deteriorating items with a stochastic demand rate and a fixed shelf lifetime. Many researchers have been studied deterioration phenomenon as the deteriorating items always appear ubiquitously. In practice, the expiration date is a problem of deteriorating items that must be sold before their fixed shelf lifetime, or that only can be used within a certain period after being unpacked. As a result, consideration of the expiry date could help enterprise to avoid profit loss without waste of the orders. Most of current inventory models dealing with deterioration would assume a certain or a constant demand function. This is certainly unreasonable in a prevailing market of stochastic demand which conforms to our daily reality, therefore stochastic demand must be considered. Here, we present ordering policies for two such inventory models. In model I, ordering would be immediately replenished when the inventory level drops to zero even before the expiration date. Namely, the stock shortage is not allowed. In model II, shortage is allowed and the items are not backlogged even after the stock depletes. Only at the expiration date can the replenishment arrived instantaneously. Furthermore, because of the effect of the stochastic demand condition, we must consider two cases for each model in this paper. In the first case, due to lack of demand, the stock remains even at expiration date. The remainder is assumed to be discarded with cost. In the second case, the stock depletes earlier before the expiration date during the period of high demand. In this case, model II occurs shortage until replenishment arrived at expiration date. Finally, we provide the approximated solution for optimal ordering quantity for both models. In order to maximize expected relevant total profit, we also present sensitivity analysis of the expected total relevant profit influenced by prices, expiration dates …etc. by the help of numerical examples. It shows that our approximated solutions from the assumed models that mentioned above gives conditions and the results very close to the optimal solution obtained from computation. Moreover, these results reveal the impact of various parameters on the optimal policy and the profit.