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Abstract. The present paper deals with an economic order quantity model for items deteriorating at some constant rate with demand
changing at a known and at a random point of time in the fixed production cycle.
AMS Mathematics Subject Classification : 90B05
Key words and phrases : Inventory, EOQ model, deterioration, demand rates, time-epoch, On-hand inventory, a random point of time,
day by day
1. Introduction
The economic order quantity model is the oldest inventory control
model. In the year 1915, Harris [2] have discussed this model. Ostenyoung et al. [6] in one of their recent publications have reported that this
model is still widely used in industry, although the assumptions necessary to justify its use such as constant demand rate, known inventory
holding and set up costs, no shortages allowed etc. are rarely met.
Numerous research efforts have been under taken to extend the model
of Harris and Wilson to conform more closely with real-world situations.
Attempts in analyzing mathematical models of inventory in which a constant or variable proportion of the on-hand inventory deteriorates with
time have been under taken by Ghare and Schrader [7], Goel and Aggarwal [12], Covert and Philip [8], Shah [9], Misra [10], Datta and Pal [11],
etc. to name only a few.
398
1 : 0 t z
2 : z t T
399
1 , 0 t z
2 , z t T
(1)
(2)
Using the conditions I(0) = Q and I(T ) = 0 and neglecting higher powers
of (<< 1), the solutions of the above differential equations are
I(t) =
Q(1 t) 1 (t t2 ),
Q(1 t) (1 2 )[z(1 t) +
z 2
2 ]
2 t[1
t
2 ],
0tz
ztT
(3)
(4)
Since I(T ) = 0, we get neglecting terms of order higher than 0(2 ) the
following
z 2
T 2
] + 2 [T +
]
(5)
Q = (1 2 )[z +
2
2
The average number of units AI(T ) in the inventory during the period
(0, T ) is
Z
1 T
AI(T ) =
I(t) dt
T Z0 z
Z T
1
[ I(t)dt +
I(t)dt]
=
T 0
z
Substituting the values of I(t) in the above integrals and then eliminating
Q using equation (5) and neglecting higher order terms in we find the
following :
1
z 2 z 3
T 2 T 3
[(1 2 )( +
) + 2 (
+
)]
T
2
6
2
6
Therefore, aveage cost per unit time in (0, T ) is
AI(T ) =
(6)
K + cQ h
z 2 z 3
T 2 T 3
+ [(1 2 )( +
) + 2 (
+
)]
T
T
22
6
22
6
z
T
= K/T + c[(1 2 )(z +
) + 2 (T +
)]/T
2
2
2
3
2
3
z
T
z
T
+h[(1 2 )( +
) + 2 (
+
)]/T
2
6
2
6
We now minimize the average cost per unit time c(T, z) under the following two situtations :
(i) z is a known point of time.
(ii) z is a random point of time.
Case I : z is a known point of time.
c(T, z) =
400
(a) For z T .
In this case, the expression for the average cost c(T, z) reduces to the
following
c(T ) = K/T + c1 [T +
T 2
T 2 T 3
]/T + h1 [
+
]/T
2
2
6
which is the cost function of the EOQ inventory model for deteriorating
items.
If there be no deterioration i.e. = 0, the above expression further
simplifies to the following
c(T ) = K/T + c1 + h1 T /2
which is similar to the equation obtained by Harris and Wilson.
(b) For z < T .
Since z < T , we can take z = 0 T, 0 0 < 1.
Thus from expression (6), we find
AI(T ) = [(1 2 )02 (
T 2 0 T 3
T 2 T 3
+
) + 2 (
+
)]/T
2
6
2
6
h + c 2
h
2
[0 1 + (1 02 )2 ] + T [1 03 + 2 (1 03 )] = 0
2
2
3
or, LT 3 + MT 2 + N = 0
where
(9)
2
L =
+ 2 (1 03 )]
3
M = (h + c)[1 02 + 2 (1 02 )]
N = 2K
h[1 03
(10)
Since 0 0 < 1 and the last term of the cubic equation (9) is negative,
it has at least one positive real root.
401
Let T be the positive real root of the equation (9), then T is the
optimum cycle time. It can also be seen that the sufficient condition for
minimum cost
2 c(T )
|T =T > 0 is satisfied.
T 2
From expression (5), we can determine the optimum value of Q as follows.
0 T
T
] + 2 T (1 0 )[1 +
]
(11)
2
2
The expression for the minimum cost c(T ) can be obtained by substituting T = T in the equation (8) where T is the optimum cycle time
to be obtained from equation (9).
Particular Cases :
(i) Absenece of deterioration :
In the absence of deterioration ( = 0), the expression for the minimum
cost c(T ) and the optimum ordering quantity Q reduce to the following
:
hT 2
c(T ) = [K/T + c0 (1 2 ) + c2 +
{0 (1 2 ) + 2 }]
2
0 T + 2 T (1 0 )
and Q = 1q
where T = 2K/[1 02 + 2 (1 02 )]h
Q = 1 0 T [1 +
T
c1 T
h1 T
(1 + 02 ) +
[1 +
+ 03 T /6]
2
2
3
and Q = 1 T [1 + T3 ]
where the optimum cycle time T is the positive real root of the cubic
equation
h
1 (03 + 2)T 3 + (h + c)1 T 2 2K = 0
3
(iii) Uniform demand rate and absence of deterioration :
(1 = 2 , = 0).
In this case, the expression for the minimum cost
c = c1 +
2h1 K
402
The optimum cycle time and order quantity are the following
T =
2K/h1 , Q =
2K1 /h.
T 2
[K + c(1 2 )[E(z) + E(z 2 )] + c2 (T +
)]
T
2
23
2
h
T
1
2 h T
+ (1 2 )[ E(z 2 ) + E(z 3 )] +
(
+
) (12)
T
2
6
T 2
6
"
FY (u), u < T
0
uT
E(z 2 ) =
E(z 3 ) =
Z T
Z0 T
Z0 T
0
F Y (u)du
2uF Y (u)du
3u2 F Y (u)du.
Substituting these integrals for E(z), E(z 2 ) and E(z 3 ) in the equation
(12), the expected total cost reduces to the following
(T ) =
1
[K
T
h Z T
+
2 0
RT
F Y (u)du + (h + c) 0T uF Y (u)du
cT 2 hT 2 hT 3
2
+
+
)]
u F Y (u)du} + 2 (cT +
2
2
6
(13)
(1 2 ){c
403
)
Equation (13) is of the form R+(T
, T 0, where R = K.
(T )
Now (0) = (0), and (T ), (T ) are continuously differentiable functions in [0, ) with strictly positive derivatives 0 (T ) and 0 (T ) for all
T 0.
Moreover, D(T ) = 0 (T )/0 (T )
= [2 + (2 1 )F Y (T )][c + hT + T (c +
hT
)]
2
(T ) =
[K + c(1 2 ){ z()p()d +
z 2 ()p()d}
T
2
h
T 2
1Z 2
)] + (1 2 )[
+c2 (T +
z ()p()d
2
T
2
2 h T 2 T 2
(
+
)
(14)
+
z 3 ()p()d] +
6
T 2
6
Example 1. Let z() = a + b, a, b > 0
and
p() =
e , > 0
0,
elsewhere.
Substituting for z() and p() in the equation (14) and then simplifying
we find the expected cost.
(T ) =
404
Now equating
(T )
T
2 h 3
T + 2 (h+c)
T 2 [K + (1 2 ){c(a + b)
3
2
1 2
+ 2 (a + 2ab + 2b2 )(h + c) + h
(a3 + 3a2 b +
6
2
< Q >= (1 2 )[a + b + (a2 + 2ab + 2b2 )] + 2 [T + T ] (16)
2
2
Now we have studied the following three situations :
(i) when there is no deterioration ( = 0).
In this case equation (15) reduces to the following
2 h 2
h
T [K + (1 2 ){c(a + b) + (a2 + 2ab + 2b2 )}] = 0
2
2
Therefore the optimum cycle time is
h
T = [2K/2 h + 2(1 2 ){c(a + b) + (a2 + 2ab + 2b2 )}/2 h]1/2
2
Also from (16), the optimum ordering quantity is
< Q > = (1 2 )(a + b) + [2K2 /h + 22 (1 2 ){c(a + b)
h
+ (a2 + 2ab + 2b2 )}/h]1/2
2
(ii) when there is no change of demand rate i.e. uniform demand rate
(1 = 2 ).
In this case equation (15) gives
2 h 3 2
T + (h + c)T 2 K = 0
3
2
The optimum cycle time T can be obtained from the above cubic equation.
Also the optimum ordering quantity
< Q >= 2 [T + T 2 ].
2
(iii) when there is no deterioration and no change of demand rate ( =
0, 1 = 2 ).
Therefore from equation (15), the optimum cycle time is
T = [2K/1 h]1/2
405
p() =
1
m1
(1 )n1 ,
(m,n)
0,
0<<1
m, n > 0
elsewhere
2
+b m(m + 1)/(m + n)(m + n + 1)) + (a3 + 3a2 bm/(m + n)
6
+3ab2 m(m + 1)/(m + n)(m + n + 1)
+b3 m(m + 1)(m + 2)/(m + n)(m + n + 1)(m + n + 2))}
2 h T 2 T 3
(
+
).
+
T 2
6
)
Equating (T
to zero, we get the following cubic equation in T
T
2 h 3
T + 22 (h + c)T 2 [K + (1 2 ){c(a + bm/(m + n))
3
+ 12 (a2 + 2abm/(m + n) + b2 m(m + 1)/(m + n)(m + n + 1))(h +
(a3 + 3a2 bm/(m + n) + 3ab2 m(m + 1)/(m + n)(m + n + 1)
+ h
6
3
c)
(17)
Since 1 > 2 , the above equation has a positive real root T which is the
optimum cycle time T .
Thus using the expression (5), the expected optimum ordering quantity
is
406
< Q >= 1 [T + T 2 ]
2
(iii) When the deterioration is absent and the demand rate is uniform
( = 0, 1 = 2 ) : using (17) and (18), the optimum cycle time and optimum ordering
quantity are the following
T
= [2K/1 h]1/2
< Q > = [2K1 /h]1/2
References
1. B.V. Dhandra and M.S. Prasad, A continuous review inventory model with alternating demand rates , International journal of Management and Systems, Vol.
11(1995), No. 1, 71-80.
2. F.W. Harris, What quantity to make at once. The Library for Factory Management,
Vol. V, Operation and costs, A.W. Shaw, Chicago (1915), 47-52.
3. G. Hadley and T.M. Whitin, Analysis of inventory system , prentice - Hall Inc.,
1963.
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