CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X

(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

AN INVENTORY MODEL FOR DETERIORATING ITEMS

WITH MULTI-VARIATE DEMAND AND PARTIAL
BACKLOGGING UNDER INFLATION
A. K. Malik & Ashu Sharma

Abstract: This paper deals with an optimal replenishment policy for deteriorating items
with multi-variate demand and partial backlogging. The proposed model allows for
multivariate demand replenishment cycles, partial backlogging, and time-varying
shortage intervals. Consequently, the proposed model is in a general framework for that
inventory models includes these above assumptions. We shown that the conditions the
optimal replenishment schedule exists uniquely, and provide a good estimate for ûnding
the optimal replenishment number.

1. INTRODUCTION
Ghare and Schrader (1963) ûrst developed an economic order quantity (EOQ) model by
taking exponential decay. After that, Covert and Philip (1973) extended Ghare and
Schrader’s constant deterioration rate taking into a two-parameter Weibull distribution. In
real-life situations, for certain types of consumer goods (e.g., fruits, electronics items,
cloths, vegetables, donuts, and others), the consumption rate is sometimes inûuenced by
the stock-level. The related analysis on such inventory model with stock-dependent
consumption rate was discussed by Levin et al., (1972), Balkhi and Benkherouf (2004),
etc. Teng et al., (2003) then extended the fraction of unsatisûed demand backordered to
any decreasing function of the waiting time up to the next replenishment. Teng and Yang
(2004) further generalized the partial backlogging EOQ model to allow for time-varying
purchase cost. Moreover, the effects of inûation and time value of money are vital in
practical environment, especially in the developing countries with large scale inûation.
Therefore, the effect of inûation and time value of money cannot be ignored in real
situations. To relax the assumption of no inûationary effects on costs, Buzacott (1975)
and Misra (1975) simultaneously developed an EOQ model with a constant inûation rate
for all associated costs. Later, Yang et al., (2001) established various inventory models
with time varying demand patterns under inûation. Recently, Chern et al., (2008)
proposed partial backlogging inventory lot-size models for deteriorating items with
ûuctuating demand under inûation. Roy, Sana and Chaudhuri (2011) developed an
optimal shipment strategy for imperfect items in a stock-out situation. Yong, Wang and
Lai (2010) discussed an optimal production-inventory model for deteriorating items with
multiple-market demand.

Page | 401 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

In this paper, we consider an economic order quantity (EOQ) model with

multivariate demand rate, in which (1) shortages are partial backlogging to reûect the fact
that longer the waiting time; the smaller the backlogging rate, (2) the effects of inûation
and time value of money are relevant or vital, and (3) the replenishment cycles and the
shortage intervals are time varying. Hence, the search for the optimal number of
replenishments is simpliûed to ûnding a local maximum.

2. ASSUMPTIONS AND NOTATION

The mathematical model of the inventory replenishment problem is based on the
following assumptions:
1. The replenishment rate is inûnite and lead time is zero.
2. Shortages are allowed. Unsatisûed demand is partially backlogged. For
convenience, the following notation is used throughout the entire paper.

a  bt  cI ( t ), I ( t)  0,
D ( t) 

a  bt , I ( t)  0,
the demand rate at time t, where a, b are positive constants and I (t) is the inventory level
at time t.
H the time horizon under consideration
I1(t) the inventory level at time t
 the backlogging rate which is a decreasing function of the waiting time t, we
– t
 here assume that  (t) = e , where  0, and t is the waiting time
 the deterioration rate per unit per unit time
r the discount rate
i the inûation rate, which is varied by the social economical situations
R r – i, the discount rate minus the inûation rate
p selling price per unit
Co the internal ûxed order cost per order
Cp the external variable purchasing cost per unit
Ch the inventory holding cost per unit per unit time
Cb the backlogging cost per unit per unit time

Page | 402 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

Cl the cost of lost sales per unit

n the number of replenishments over [0, H] (a decision variable)
th
ti the i replenishment time (a decision variable), i =1; 2; ... ; n

si the time at which the inventory level reaches zero after ti (a decision variable),
i = 1; 2; ... ; n

3. MATHEMATICAL MODEL
th
The i replenishment is made at time ti. The quantity received at ti is used partly to meet
the accumulated backorders in the previous cycle from time si – 1 to ti (si – 1  ti). The
inventory at ti gradually reduces to zero at si (si > ti ). During the time interval [ti, si], the
inventory is depleted by the combined effect of stock-dependent consumption rate and
th
deterioration, the inventory level at time t during the i replenishment cycle is governed
by the following differential equation:

dI1 (t )
I1 (t )  [ a  bt  cI1 ( t )] t i  t  si (1)
dt
With I1(si) = 0. Solving the differential equation (1), we get the inventory level as
follows:

{a ( c )  b} ( c) (si  t) b ( c) (si  t)

2
I1(t )  ( c) (e 1)   c (s i e  t) ti  t  si (2)
During the time interval [si – 1, ti], the demand rate f (t) = a and the backlogging rate
–  (t – t)
 (ti – t) = e i . Hence, the amount of backorders B (t) is governed by the
following differential equation:

dI 2 (t )  ( ti  t) s
dt  ( a  bt ) e i–1  t  ti (3)

With I 2 (si 1 )  0. Solving the differential equation (3), we get the inventory
level as follows:
 ti s 1 t t s
I (t )  e [(e i e ) ( a  b )  b (te s e i1 )] s  t  t (4)
2 2 i1 i–1 i

Next, the total relevant inventory cost per cycle consists of the following elements:
1. Ordering cost per cycle is A. (5)

Page | 403 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

th
2. Inventory holding cost during the i replenishment cycle as
s
i

HC = C h  e
 Rt
I1( t ) dt
t
i

  e  Rs i e  Rs i e c  si e  ( R  c ) t i e  Rti 

 a ( c )  b  
HCi = Ch      
 ( c)
2
  (R  c ) R R  c R 
  

 si e
 Rs i
si e  Rs i e  Rsi si e  c si e  (R  c )ti 
b  (R  c )  R R2 R  c 
   (6)
 Rt  Rt
( c)  tie i e i 
   
2
 R R 
3. The present value of the backlogging cost during [si – 1, ti] is
t
i

BCi = C b eRtI2(t)dt
s
i1

  Rti . C   (t i  si  1 ) 
e b  a b  e 1 
      
    R R  
  
 

ti 1 s i1
 (t  s
i i1
)


 b   2  e 
  R  ( R ) R 

 

( R  ) (t i  si  1)  b  1 1 
 e a   
   R  R 
  s1 s

R .

b
 i 1

2

i1

if
BCi =   R  ( R )

R

(7)

 (s  t )
  Rti . C  i1 i 
e b a b  e 
     ti  
     R 
 
  2 s 1  (si  1  ti

 ti i )
 b   e 
 

2 R  

2
 s s  if R .

 a
b  1  s b  i1  i  1
   
   R
 i1 


   2 R 
  

Page | 404 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

4. The present value of the cost of lost sales during [si – 1, ti] is
ti  Rt  (t  t)
LS=C
i l
 e (a  b t ) [1  e i ] dt
s
i1

   Rt
  a  bt b i

 Cl e  2
 (2 R ) 

i  2 
   R ( R ) R ( R ) 
 
 Rs
 
 i1  1 b
 e  ( a  bsi  1 )  2
 R R
  (t i  si  1)  
 e a  bs  b   if R .

 ( R )  R    
 i1 


=  (8)

   a bti b 
     2  ati 
 C e Rti  R R R 
 l   2 2 
bs
    bti i1 
    asi  1  
   2 2 
 e
s
i1
 1 ( a  bs ) b if R .
  i 1 2 
 R R 
th
From (2) and (5), we have the order quantity at ti in the i replenishment cycle as
Qi = I 1 ( t i )  I 2 ( ti )
(  c ) (s  t ) (  c ) (s  t )
= {a ( c )  b} (e i i  1)  b (s e i i t )
2
( c)  c i i
t i
e [(e
s
i1 e
i  1 )] .
t
(9) i ) ( a  b )  b (te t i s e
s
2
 i i1
th
Therefore, the present value of the purchase cost during the i replenishment
cycle is
 Rt  Rt
PC = C e i C e i Q. (10)
i o p i
th
The present value of revenue during the i replenishment cycle is
 si 
RV = p  e  Rt i I ( t )   e  Rt {a  bt  cI ( t )} . dt  . (11)
i  2 i 1 
 ti 

Page | 405 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

For simplicity, we assume that R  throughout the rest of the paper. By using a
similar analogous argument, the reader can obtain the results for the case of R =
. Hence, if n replenishment orders are placed in [0, H], then the present value
of the total proût during the planning horizon from 0 to H is as follows:

n
TP (n,{si },{t i })   (RVi  PCi  HCi  BCi  LSi ) . (12)
i 1

W i t h 0 = s0 < t1, si – 1 < ti < si, i =1, 2, 3, ..., n, and sn = H. The objective of the problem here
is to determine n, {si} and {ti} such thatTP(n,si ,ti ) in (12) is

maximized. For a fixed value of n, the necessary conditions for TP(n,si

,ti ) to be maximized are:
 TP ( n, {si }, {t i}) 
0 for i  1, 2, 3, ..., n  1

si  (13)
.
 TP ( n, {si }, {t i})  0 for i  1, 2, 3, ..., n  1
t 
i 
4. CONCLUSIONS
In this paper, we develop an inventory model for deteriorating items with multivariate
demand rate has been proposed. We have shown that not only the optimal replenishment
schedule exists uniquely, but also the total proût associated with the inventory system is a
concave function of the number of replenishments. The proposed model can be further
extended in several ways. For example, we may add production and trade credit into
consideration. Also, we could extend the deterministic model into a stochastic model. Finally,
we could generalize the model to allow for quantity discounts, variable holding cost or others.

REFERENCES
[1] Balkhi Z. T., and Benkherouf L., (2004), On an Inventory Model for Deteriorating Items with
Stock Dependent and Time-Varying Demand Rates, Computers and Operations Research,
31(2): 223–240.
[2] Buzacott J. A., (1975), Economic Order Quantities with Inflation, Operational Research
Quarterly, 26(3): 553–558.
[3] Chern M. S., Yang H. L., Teng J. T., and Papachristos S., (2008), Partial Backlogging
Inventory Models for Deteriorating Items with Fluctuating Demand Under Inflation,
European Journal of Operational Research, 191(1): 125–139.

[4] Covert R. B., and Philip G. S., (1973), An EOQ Model with Weibull Distribution
Deterioration, AIIE Transactions, 5: 323–326.
[5] Ghare P. M., and Schrader G. P., (1963), A Model for an Exponentially Decaying Inventory,
Journal of Industrial Engineering, 14(5): 238–243.
[6] Levin R. I., McLaughlin C. P., Lamone R. P., and Kottas J. F., (1972), Production/Operations
Management: Contemporary Policy for Managing Operating Systems, McGraw-Hill, New York.

Page | 406 Copyright ⓒ 2020 Authors

CLIO An Annual Interdisciplinary Journal of History ISSN: 0976-075X
(UGC Care Listed Journal) Vol-06 Issue-2 April 2020

[7] Misra R. B., (1975), A Study of Inflationary Effects on Inventory Systems, Logistic
Spectrum 9(3): 260–268.
[8 Teng J. T., Yang H. L., and Ouyang L. Y., (2003), On an EOQ Model for Deteriorating Items
with Time-Varying Demand and Partial Backlogging, Journal of the Operational Research
Society, 54(4): 432–436.
[9] Teng J. T., and Yang H. L., (2004), Deterministic Economic Order Quantity Models with
Partial Backlogging when Demand and Cost are Fluctuating with Time, Journal of the
Operational Research Society, 55(5): 495–503.
[10] Yang H. L., Teng J. T., and Chern M. S., (2001), Deterministic Inventory Lot-Size Models
Under Inflation with Shortages and Deterioration for fluctuating Demand, Naval Research
Logistics, 48(2): 144–158.
[11] Yong H., Shou-Y. W., K.K. Lai (2010). An Optimal Production Inventory Model for
Deteriorating Items with Multiple-Market Demand, European Journal of Operational
Research, 203(3): 593–600.
[12] Roy Sana, and Chaudhuri, (2011), An Optimal Shipment Strategy for Imperfect Items in a
Stock-Out Situation, Mathematical and Computer Modelling, In Press.

A. K. Malik
Department of Mathematics,
B. K. Birla Institute of Engineering &Technology,
Pilani (Rajasthan), India.
E-mail: ajendermalik@gmail.com

Ashu Sharma
Department of Mathematics,
Northern Institute of Engineering Technical Campus
Alwar (Rajasthan).
E-mail: sharma.ashu80@gmail.com.

Page | 407 Copyright ⓒ 2020 Authors