Mathematical and Computer Modelling 49 (2009) 893–905

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Mathematical and Computer Modelling

journal homepage: www.elsevier.com/locate/mcm

An application of Genetic Algorithm in solving an inventory model with

advance payment and interval valued inventory costs
R.K. Gupta a , A.K. Bhunia b,∗ , S.K. Goyal c
a
Department of Business Administration, North Bengal University, Darjeeling – 734 013, India
b
Department of Mathematics, The University of Burdwan, Burdwan- 713104, India
c
Department of Decision Sciences and MIS, John Molson School of Business, Concordia University, Montreal, Quebec, Canada, H3G IM8

article info a b s t r a c t

Article history: The purpose of this research is to solve the mixed integer constrained optimization
Received 29 July 2007 problem with interval coefficient by a real-coded genetic algorithm (RCGA) with ranking
Received in revised form 28 August 2008 selection, whole arithmetical crossover and non-uniform mutation for non-integer
Accepted 16 September 2008
decision variables. In the ranking selection, as well as in finding the best solution in each
generation of RCGA, recently developed modified definitions of order relations between
Keywords:
interval numbers with respect to decision-making are used. Also, for integer decision
Inventory
Advance payment
variables, new types of crossover and mutation are introduced. This methodology is applied
Genetic algorithm to solve a finite time horizon inventory model with constant lead-time, uniform demand
Interval numbers rate and a discount by paying an amount of money in advance. Moreover, different
Interval order relations inventory costs are considered to be interval valued. According to the consumption of items
during lead-time and reorder level, two cases may arise. For each case, the mathematical
model becomes a constrained nonlinear mixed integer problem with interval objective. Our
objective is to determine the optimal number of cycles in the finite time horizon, lot-size
in each cycle and optimal profit. The model is illustrated with some numerical examples
and sensitivity analysis has been done graphically with the variation of different inventory
parameters.
© 2008 Elsevier Ltd. All rights reserved.

1. Introduction

In the present competitive market, it is normally observed that a wholesaler requires some payment when an order from
a retailer is placed. Further, there are situations in which if a retailer gives an extra advance payment (AP), then he may
get some price discount at the time of final payment (e.g. brick and tile factories announce such an offer at the beginning
of the season). However, by paying a certain percentage of the total purchase cost per cycle as an advance payment to
the wholesaler, the retailer sacrifices the interest on the amount of money paid as AP. Thus we find that AP is a real life
phenomenon and the decision regarding the amount of AP to be made has a crucial impact on the total profit and inventory
decisions. Maiti, Bhunia and Maiti [1] have studied the effect of AP on the total profit and inventory decisions. They assumed
carrying cost, ordering cost, purchase cost and advertising cost to be constant. However, in real life situations, these costs
should be imprecise numbers instead of fixed real numbers because inventory costs might fluctuate due to various reasons.
To solve the problem with imprecise numbers, stochastic, fuzzy and fuzzy-stochastic approaches may be used. In stochastic
approach, the parameters are assumed to be random variables with known probability distribution. In fuzzy approach, the
parameters, constraints and goals are considered as fuzzy sets with known membership functions. On the other hand, in

∗ Corresponding author.
E-mail address: bhuniaak@rediffmail.com (A.K. Bhunia).

0895-7177/$ – see front matter © 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.mcm.2008.09.015
894 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

Notations
x Lead-time (in time unit).
H Prescribed time horizon (H is sufficiently larger than x, so that the probability of n < 2 is negligible).
n Number of replenishment to be made during the prescribed time horizon H.
Q Order quantity
Qr Reorder level
q(t ) Inventory level at time t.
T Cycle length.
Co ∈ [CoL , CoR ] Ordering cost per order. (in $)
Cp ∈ [CpL , CpR ] Unit purchase cost. (in $)
Ch ∈ [ChL , ChR ] Holding cost per unit item per unit time. (in $)
Cs ∈ [CsL , CsR ] Shortage cost per unit item per unit time. (in $)
P (>CpR ) Unit selling price of the product. (in $)
D Uniform demand rate.
λ The fraction by which the rate of demand decreases during the stock-out periods (0 < λ < 1)
Ap Advance payment for purchasing quantities. (in $)
Ic Percentage of discount on unit purchase cost.
Id The percentage of Ap (advance payment) with respect to total purchase cost per cycle.
Ib The prevailing interest rate.
Z ∈ [ZL , ZR ] Total profit over the planning horizon H.

The following notations are used in the real-coded Genetic Algorithm

p_size Population size
p_cros Probability of crossover
p_mute Probability of mutation
m_gen Maximum number of generation

fuzzy-stochastic approach, some parameters are viewed as fuzzy sets and others, as random variables. However, it is not
always an easy task for a decision maker to specify the appropriate membership function or probability distributions. For
these reasons, in this paper we have represented the imprecise numbers by interval numbers. These types of imprecise
problems can be solved by a powerful computerized heuristic search and optimization method viz., genetic algorithm
(GA), which is based on the mechanics of natural selection (dependent on the evolution principle ‘‘Survival of the fittest’’).
It is executed interactively on the set of real/binary-coded solution called population. In each iteration (which is called
generation), three basic genetic operations i.e., selection/reproduction, crossover and mutation are performed.
Till now, only a few researchers have modelled different types of real life inventory problems and solved them with the
help of GA. In this connection, the works of Dimopoulos, and Zalzala [2], Aytug et al. [3], Razaei and Davoodi [4,5], Khouja
et al. [6], Mahapatra et al. [7], Pal et al. [8], Sarkar and Newton [9], Gupta et al. [10] and Mondal and Maiti [11], are worth
mentioning.
In this work, our objective function would be interval valued as some of the parameters are interval valued. To solve this
type of problem by GA method, order relations of interval numbers are essential for selection/reproduction operation as
well as for finding the best chromosome in each generation. Ishibuchi and Tanaka [12], Chanes and Kuchta [13] are among
the very few to have defined the order relations of interval valued numbers. Sengupta and Pal [14] proposed two different
approaches (deterministic and fuzzy) to compare any two interval numbers with respect to the decision makers point of
view. However, in some cases, their approaches fail to find out the order relations between two interval numbers. Very
recently, Mahato and Bhunia [15] proposed modified definitions of order relations with respect to optimistic and pessimistic
decision maker’s point of view for maximization and minimization problems.
In this paper, an inventory model is developed by incorporating the effect of AP. It is assumed that a certain percentage
of total purchasing cost per cycle is to be paid as AP. By making this advance payment a discount on the purchase cost is
secured. However, interest on the money paid as AP is lost. Moreover, inventory costs like the carrying cost, ordering cost,
purchase cost and shortage cost have been considered to be interval valued. Two cases, one without shortage and another
by permitting partially backlogged shortages have been studied. For the second case, during the period of shortage it is
assumed that the demand rate gets diminished by a certain fraction (since during shortage only extremely loyal customers
are ready to wait for future purchase from the shop currently having shortage and a fraction of the customers shift to a
new shop). For each case, we have formulated mixed integer constrained optimization problem with interval objective with
the help of interval arithmetic. To solve these problems, we have developed a real-coded genetic algorithm with ranking
selection, whole arithmetical crossover and mutation considering the order relations of interval numbers with respect to
pessimistic decision maker’s point of view. In the case of mutation, to maintain the diversity of the population, we have
 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905 895

considered uniform and non-uniform mutation for integer and non-integer variables respectively. In the whole arithmetic
crossover, we have taken the convex combinations of genes corresponding to non-integer variables and intermediate value
of gene corresponding to the integer variable of two randomly selected chromosomes. Finally, the model has been illustrated
with numerical examples and sensitivity analyses have been done graphically with the variation of different inventory
parameters, on the optimal profit.

2. Finite interval arithmetic

An interval valued number is a closed interval which is defined by either its left and right limits or its centre and radius

i.e., either A = [aL , aR ] = {x : aL ≤ x ≤ aR , x ∈ R}

or = haC , aW i = {x : aC − aW ≤ x ≤ aC + aW , x ∈ R}

where aL and aR are the left and right limits respectively; ac = (aL + aR ) /2 and aW = (aR − aL ) /2, the centre and radius of
the interval; R, the set of real numbers.
Particularly, each real number can be regarded as an interval, such as, for all x ∈R, x can be written as an interval [x, x],
which has zero width.
Now, we shall give the concise definitions of four arithmetical operations of intervals, which are given in any standard
book of interval analysis.

Definition 1. Let ∗ ∈ (+, −, ·, /) be a binary operation on the set of real numbers. If A and B are two closed intervals, then

A ∗ B = {a ∗ b : a ∈ A and b ∈ B}

defines a binary operation on the set of closed intervals. In case of division, it is assumed that 0 6∈ B.
For two interval numbers A = [aL , aR ] and B = [bL , bR ], the operations on interval numbers used in this paper may be
explicitly calculated from Definition 1 as

A + B = [aL + aR , bL + bR ]
A − B = [aL − bR , aR − bL ]
[λaL , λaR ] if λ ≥ 0

λA =
[λaR , λaL ] if λ < 0
where λ is a real number.
In this paper, as some system parameters are considered as interval valued, to find out the optimal solution of the
optimization problem corresponding to the inventory system, we have to discuss the order relations of interval numbers
for maximization problems with respect to decision makers point of view. Let the imprecise numbers from two alternatives
be represented by two closed intervals A = [aL , aR ] and B = [bL , bR ] respectively. It is also assumed that the value of each
alternative lies in the corresponding interval. These two intervals A and B may be of the following three types:

Type-I: Both the intervals are disjoint.

Type-II: Intervals are partially overlapping.
Type-III: One interval is contained in the other.

As the definition of complete order relation of interval numbers are not available in the existing literature, we shall
consider the definitions order relations for maximization problems developed recently by Mahato and Bhunia [10] in the
context of optimistic and pessimistic decision makers point of view. These definitions are as follows:

2.1. Optimistic decision-making

In this case the decision maker chooses the lowest cost/time for minimization problems and the highest profit for
maximization problems ignoring the uncertainty.

Definition 2. For maximization problems, let us define the order relation ≥o max between the intervals A and B as

A ≥o max B iff aR ≥ bR
A >o max B iff A ≥o max B and A 6= B.

This implies that, A is superior to B and optimistic decision maker accepts the profit interval A. Here also, this order relation
≥o max is not symmetric but transitive.
896 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

Fig. 1. The inventory situation for the no shortage case.

2.2. Pessimistic decision-making

In this case, the decision maker expects the maximum profit for maximization problems according to the principle ‘‘Less
uncertainty is better than more uncertainty’’ or ‘‘More uncertainty is worse than less uncertainty’’.

Definition 3. For maximization problems, let us define the order relation >p max between the intervals A = [aL , aR ] =
haC , aW i and B = [bL , bR ] = hbC , bW i for a pessimistic decision maker as
(i) A >p max B and aC > bC , for type-I and type-II intervals
(ii) A >p max B aC ≥ bC aW < bW , for type-III intervals.
However, for type-III intervals with aC > bC ∧ aW > bW , pessimistic decision cannot be taken. Here, the optimistic decision
may be considered.

3. Assumptions and notations

The following assumptions and notations are used to derive the Mathematical model of proposed inventory system.
Assumptions
(i) The inventory system involves only one item.
(ii) A single order will be placed at the beginning of each cycle and the entire lot is delivered in one batch.
(iii) The size of replenishment is finite.
(iv) Lead-time is fixed.
(v) Shortages (if any) are allowed and partially backlogged.
(vi) The inventory planning horizon is finite and is sufficiently larger than the lead-time.
(vii) A certain percentage of total purchase cost per cycle is paid as advance payment.
(viii) A certain percentage of discount on unit purchase cost will be available due to the advance payment.
(ix) The inventory costs (like, holding cost, purchase cost, ordering cost, shortage cost etc.) lie in the known intervals.
(x) The demand rate is uniform. However this rate differs during the stock-out periods.

4. Mathematical formulation of the model

In the development of the model, we have assumed that initially the business starts with an inventory level of Q units of
the item. When the inventory level reaches to Qr (i.e., at time t = t1 ) a new order is placed for the next cycle. The demand
during the lead-time equals Dx, so two cases may arise:
Case-1: Qr ≥ Dx
Case-2: Qr < Dx.
Case-1: Qr ≥ Dx
In this case, no shortage will occur. The pictorial representation of the inventory situation is shown in Fig. 1.
The total holding cost H1 (x) in the time horizon H is given by
"Z #
t1 n−1 Z
X tj + x n−1 Z
X tj+1 Z H
H1 (x) = Ch qdt + qdt + qdt + qdt
0 j =1 tj j =1 tj + x tn

Qr Qr −Dx Qr 0
Z Z Z Z 
−qdq −qdq −qdq −qdq
= Ch + (n − 1) + (n − 1) +
Q D Qr D Q +Qr −Dx D Qr D
Ch  2
nQ + 2(n − 1){Qr − Dx}

= (1)
2D
 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905 897

Fig. 2. The inventory situation for the case with shortage.

where
DH
Q = (2)
n
and
Ap = Id (1 − Ic )QCp . (3)
The Total Profit over the planning horizon H = hTotal sales revenuei−h Total purchase costi−hTotal interest on loan from
banki − hTotal Ordering costi − hTotal Holding costi
Ch  2
Z1 = nPQ − nQCp (1 − Ic ) − (n − 1)Ap xIb − nCo − nQ + 2(n − 1)(Qr − Dx)

2D
Ch  2
= nPQ − nQCp (1 − Ic ) − (n − 1)Id QCp (1 − Ic )xIb − nCo − nQ + 2(n − 1)(Qr − Dx) .

(4)
2D
For the interval valued Cp , Co and Ch , Z ∈ [ZL , ZR ]
where
ChR  2
Z1L = nPQ − nQCpR (1 − Ic ) − (n − 1)Id Q (1 − Ic )xIb CpR − nCoR − nQ + 2(n − 1)(Qr − Dx)

(5)
2D
and
ChL  2
Z1R = nPQ − nQCpL (1 − Ic ) − (n − 1)Id Q (1 − Ic )xIb CpL − nCoL − nQ + 2(n − 1)(Qr − Dx) .

(6)
2D
It is to be noted that the expressions of Z1L in (5) and Z1R in (6) are obtained using interval arithmetic.
Hence our problem is
Maximize Z1 (Qr , n)
subject to Qr ≥ Dx and n is an integer. (7)
This is a nonlinear maximization problem with interval objective.
Case-2: Qr < Dx
In this case, there will be shortages. However, in the last cycle (i.e., the nth cycle), it is assumed that shortages are not
allowed. The pictorial representation of the inventory situation is shown in Fig. 2.
The total holding cost H2 (x) in the time horizon H is given by
H2 (x) = Holding cost in (0, t1 ) + Holding cost in (tj , tj+1 ) except during the shortage time in (n − 1) cycle
+ Holding cost in (tn , H )
"Z #
Qr n −1 Z 0 n−1 Z Qr Z 0
−qdq X −qdq X −qdq −qdq
= Ch + + +
Q D j=1 Qr D j =1 Q −Qs D Qr D
Q Qr Q− Qs Qr
Z Z Z Z 
qdq qdq qdq qdq
= Ch + (n − 1) + (n − 1) +
Qr D 0 D Qr D 0 D
Ch 
Q 2 + (n − 1)(Q − Qs )2

= (8)
2D
898 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

where
DH (1 − λ)(n − 1)Qs
Q = − . (9)
n λn
The total shortage cost Sc (x) in the time horizon H is given by
Z Qs
qdq
Sc (x) = (n − 1)Cs
0 λD
Cs
= (n − 1) Qs2 . (10)
2λD
The Total Profit over the planning horizon H = hTotal Sales Revenuei−hTotal Purchase Costi−hTotal interest on loan from
banki − hTotal Ordering costi − hTotal Holding costi − hTotal Shortage Costi.
Ch  Cs (n − 1)Qs2
Z2 = nPQ − nQCp (1 − Ic ) − (n − 1)Ap xIb − nCo − Q 2 + (n − 1)(Q− Qs )2 −

2D 2λD
Ch  2  Cs (n − 1)Qs2
= nPQ − nQCp (1 − Ic ) − (n − 1)Id QCp (1 − Ic )xIb − nCo − Q + (n − 1)(Q− Qs )2 − . (11)
2D 2λD
For the interval valued Cp , Co and Ch ,
Z2 ∈ [Z2L , Z2R ]
where
Z2L = nPQ − nQCpR (1 − Ic ) − (n − 1)Id Q (1 − Ic )xIb CpR − nCoR
ChR  2  CsR (n − 1)Qs2
− Q + (n − 1)(Q− Qs )2 − (12)
2D 2λD
and
Z2R = nPQ − nQCpL (1 − Ic ) − (n − 1)Id Q (1 − Ic )xIb CpL − nCoL
ChL  2  CsL (n − 1)Qs2
− Q + (n − 1)(Q− Qs )2 − . (13)
2D 2λD
Hence our problem is
Maximize Z2 (Qs , n)
subject to Qs > 0 and n is an integer. (14)
This is a nonlinear maximization problem with interval objective.
It is noted that the solutions of the maximization problems (7) and (14) are not the optimal solutions of the proposed
inventory system. The optimal solution can be obtained by choosing the better solution from the two cases.
i.e., Maximize Z = Maximize (Z1 , Z2 ). (15)

5. Solution procedure

Now, we have to solve the nonlinear maximization problems (7) and (14) with interval objective. Generally, deterministic
inventory problems with continuous decision variables are solved by different gradient based methods. However, being
mixed integer maximization problem with interval objective, it is rather difficult to solve the problems (7) and (14) by
gradient based method. Hence we shall develop an advanced genetic algorithm for solving the mixed integer maximization
problems (7) and (14) with interval objective. The different steps of this algorithm are described as follows:
Algorithm-1
Step-1: Initialize the parameters of Genetic Algorithm, bounds of variables and different parameters of the proposed inventory
system.
Step-2: t = 0 [t represents the number of current generation].
Step-3: Initialize P(t) [P(t) represents the population at t-th generation].
Step-4: Evaluate P(t).
Step-5: Find the best result from P(t).
Step-6: t = t + 1.
Step-7: If (t > maximum generation number) go to step-14.
Step-8: Select P(t) from P (t − 1) by ranking selection process (with the help of Definition 3, discussed under Section 2).
 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905 899

Step-9: Alter P(t) by crossover and mutation process.

Step-10: Evaluate P(t).
Step-11: Find the best result from P(t).
Step-12: Compare the best results of P(t) and P (t − 1) and accept better one.
Step-13: Go to Step-6.
Step-14: Print the result.
Step-15: Stop.
For implementing the above GA in solving the mixed integer maximization problem with interval objective developed in
this model, the following basic components are considered.
• Chromosome representation and initialization of population.
• Evaluation function.
• Selection process.
• Genetic operators (crossover and mutation).
Genetic Algorithm (GA) is dependent on some parameters like population size (p_size), maximum number of generations
(m_gen), probability of crossover (p_cros) and probability of mutation (p_mute). There is no hard and fast rule for selecting the
population size of GA. Storing of the data for large population size may invite some difficulties at the time of computation
with the help of computer. However, if the population size is too small, then good crossovers cannot be implemented.
According to genetics, it is obvious that the probability of crossover is always greater than that of mutation.
For proper application of GA, the designing of an appropriate chromosome representation of solutions of the problem
is an important task. In the initial implementation of GAs, the chromosomes were represented by the strings of binary
numbers. These GAs are called binary GAs. These GAs are found to be robust search techniques to avoid local minima but
the computational cost is usually very high as compared to deterministic optimization technique. On the other hand, for the
problems having large search space and seeking high precision, there arises a number of difficulties in these methods. To
overcome these difficulties related to binary coding of continuous parameter optimization problems, real numbers are used
to represent the chromosomes in GAs. These GAs are termed as real-coded GAs. In this case, a chromosome is coded in the
form of matrix of real numbers and every component of that chromosome represents a decision variable of the problem.
As our proposed problem is nonlinear containing one discrete and two continuous variables, a real number representation
is used here. A real row matrix Vj = [Vj1 , Vj2 , ] is used as a chromosome where the components Vj1 and Vj2 represent the
decision variables, Qr /Qs and n of the problem, respectively.
After the selection of chromosome representation, the next step is to initialize the chromosomes. This procedure produces
population size number of chromosomes in which every component for each chromosome is randomly generated within the
bounds of the corresponding decision variable. There are different processes for selecting a random number, of which the
uniform distribution is used for first three components of each chromosome. For the fourth component of the chromosome,
a random value can be selected from the discrete set of values within the bounds.
After getting a population of potential solutions, we need to check how good they are. For this purpose, we have to
calculate the fitness value for each chromosome. In this work, the value of objective function (interval valued) corresponding
to the chromosome Vj is taken as the fitness value of Vj .
The selection operator plays a crucial role in GA. Usually, it is the first operator applied to the population. The primary
objective of this operator is to eliminate below average solutions from the population for the next generation under the well-
known evolutionary principle ‘Survival of the fittest’. Here, the fitness value of each chromosome/individual is an interval
valued number. So, the rank based selection procedure for finding the rank of chromosomes is an important task. This
task has been performed from the point of view of pessimistic decision maker. We have used ranking selection following
the definition (Definition 3) for comparing interval numbers. The probability of the rth chromosome being selected in this
method is defined by
prob(rth individual) = pc (1 − pc )r −1 ,
where pc is the probability of selecting the best individual and r is the rank of the individual.
After the selection process, the resulting chromosomes (those which have survived) undergo genetic operations—
crossover and mutation. It operates on two parent solutions at a time and generates offspring by recombining the features of
both the parent solutions. For this operation, expected p_cros* p_size (* denotes the product) number of chromosomes will take
part. Hence in order to determine the parents for crossover operation, select p_cros* p_size number of chromosomes. After
selection of chromosomes, the crossover operation is applied. Here crossover operation is done in the following manner:
Step-1: Find the integral value of p_cros* p_size and store it in N.
Step-2: Select the chromosomes Vk and Vi randomly among the population for crossover.
Step-3: Generate a random real number λ in [0,1].
/ /
Step-4: The first component Vk1 and Vi1 of two offspring will be created by
/
Vk1 = λVk1 + (1 − λ)Vi1
/
Vi1 = λVi1 + (1 − λ)Vk1 .
900 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

Table 1
Values of the parameters Cp , Co , P, Id , Ib , Ic , x, λ, D and H for all examples.

Parameters Cp Co P Id Ib Ic x λ D H

Values [7.0, 10.0] [20.0, 30.0] 20 0.30 0.07 0.40 0.50 0.95 70 10

Table 2
Values of parameters Ch and Cs for different examples.
Parameters Examples
1 2 3 4 5 6 7 8 9 10

Ch [0.8, 1.2] [0.8, 1.2] [0.8, 1.2] [0.1, 0.3] [0.1, 0.3] [0.1, 0.3] [0.2, 0.4] [0.2, 0.4] [1.6, 2.0] [1.6, 2.0]
Cs [4, 5] [8, 12] [92, 94] [4, 5] [8, 12] [15, 20] [25, 30] [30, 35] [8, 10] [15, 20]

/ /
Step-5: The second component Vk2 and Vi2 will be created by either
/ /
Vk2 = Vk2 − g and Vi2 = Vi2 + g if Vk2 > Vi2 or
/ /
Vk2 = Vk2 + g and Vi2 = Vi2 − g ,
where g is a random integer number between 0 and |Vk2 − Vi2 |.
Step-6: Repeat Step-2 to Step-5 for N /2 times.
Mutation introduces random variations into the population. It is applied to a single chromosome only. It is usually
performed with low probability; otherwise it would defeat the order building being generated through selection and
crossover. Mutation attempts to bump the population gently into a slightly better course. This means that mutation changes
single or all the genes of a randomly selected chromosome slightly. Here, we use non-uniform mutation whose action is
dependent on the age of the population. If the element (gene) Vik of chromosome Vi is selected for mutation and domain of
Vik is [lik , uik ], then the reduced value of Vik is given by
Vik + ∆(t , uik − Vik ), if a random digit is 0

Vik0 =
Vik − ∆(t , Vik − lik ), if a random digit is 1

where k ∈ {1, 2, 3} and ∆(t , y) returns a value in the range [0, y].
In our study, we have taken
 b
t
∆(t , y) = yr 1 − , for non-integer variables
m_gen
= a random integer between [0, y] for an integer variable.
where r is a random number in [0,1], t represents the current generation and b (which is called the non-uniform mutation
parameter) is constant.

6. Numerical examples

The proposed model is illustrated by considering the following ten examples (displayed in Tables 1 and 2). The values
of the model parameters considered in these numerical examples are not selected from any case study, but these values
considered here are all realistic. In each of the examples, 20 independent runs have been performed by the proposed GA,
of which the best value of the total profit Z in the form of interval has been taken according to the Definition 3 of interval
order relations. Thus for each of the examples, the best found values Z , Q , Qr , Qs , n and Ap have been obtained and displayed
in Table 3. In this computation, the following values of GA parameters are used: p_size = 100, p_cros = 0.9, p_mute = 0.1,
m_gen = 500.
Also to test the performance of GA, we have studied graphically the effects of changes of GA parameters like population
size (p_size), maximum generation number (m_gen), probability of crossover (p_cros) and probability of mutation (p_mute)
on the maximum total profit over the planning horizon H and shown in Figs. 3–6. Fig. 3 reveals that the value of the best
found profit stabilizes when p-cros is greater than 0.78. From Fig. 4 it is evident that, when the value of p_mute is in the
range 0.08–0.2, then the GA produces stable solution. Fig. 5 demonstrates the stability of the value of the best found profit,
when m_gen is greater than 70. Fig. 6 shows that the GA produces stable solution when p_size is above 60.

7. Sensitivity analysis

Using numerical example 3 mentioned earlier, sensitivity analyses have been done graphically to study the effect of
under or over estimation of various parameters like ‘demand rate’, ‘time horizon’, ‘the percentage of AP with respect to total
purchase cost’, ‘selling price’, ‘bank interest’ and ‘the percentage of discount on unit cost’ on the centre value of the interval
 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905 901

Table 3
Solutions of the different numerical examples.
Examples Q Qs Qr n Ap Z Remarks
Solution from

1 70.00 12.614 – 10 [87.50, 125.01] [9080.56, 10540.15] Case-2

2 63.636 5.656 – 11 [79.84, 114.05] [9065.76, 10549.72] Case–2
3 58.333 – 35.1108 12 [73.50, 105.00] [9649.56, 10558.36] Case-1
4 140.00 – 43.926 05 [176.40, 252.00] [9404.57, 10865.25] Case-1
5 140.00 – 43.926 05 [176.40, 252.00] [9404.57, 10865.25] Case-1
6 140.00 – 43.926 05 [176.00, 252.00] [9404.57, 10865.25] Case-1
7 116.667 – 44.272 06 [147.00, 210.00] [9349.65, 10073.71] Case-1
8 116.667 – 44.272 06 [147.00, 210.00] [9349.65, 10073.71] Case-1
9 58.33 19.667 – 12 [72.30, 103.29] [8941.15, 10372.52] Case-2
10 53.846 13.462 – 13 [67.02, 95.75] [8912.48, 10368.26] Case-2

Fig. 3. Best found Profit (Z ) versus p_cros.

Fig. 4. Best found Profit (Z ) versus p_mute.

valued profit. These analyses have been carried out by increasing or decreasing the percentages of parameters (from −20%
to 20%), taking one at a time and keeping the others at their own values. In each case, the best value of optimal profit has
been considered from 20 independent runs. These are shown in Figs. 7–12, which are self-explanatory.
From Fig. 7, it is observed that an increment in the rate of demand (D) is having an incremental effect on the best found
profit (as is expected) and vice versa. Moreover, the percentage changes in D are almost same as the percentage changes in
the best found profit.
Fig. 8 shows that the time horizon (H) and the best found profit are directly related. In this case, with the increase of H,
the best found profit increases and vice versa.
902 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

Fig. 5. Best found Profit (Z ) versus m_gen.

Fig. 6. Best found Profit (Z ) versus p_size.

Fig. 7. Demand rate (D) versus best found profit (Z ).

Fig. 9 implies the inverse relationship between the percentage change in the ‘percentage of AP with respect to total
purchase cost (Id )’ and the percentage change in best found profit. However, the strength of this relationship is seen to be
very low. For example, if Id is increased by 10%, then it is observed that optimal profit decreases by less than 0.1%.
An examination of Fig. 10 reveals that changes in price have a direct effect on the changes in the best found profit.
However, the percentage changes in the best found profit are slightly less than the percentage changes in price (p). (It is
noted that the angle made by the straight line with the positive direction of the horizontal axis is slightly more than 45◦ .)
 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905 903

Fig. 8. Time horizon (H) versus best found profit (Z ).

Fig. 9. The percentage of AP with respect to total purchase cost (Id ) versus best found profit (Z ).

Fig. 10. Selling price (P) versus best found profit (Z ).

From Fig. 11, it is observed that percentage changes in bank interest (Ib ) is inversely related to the percentage changes in
the best found profit. However, it is also seen that the impact of the change in bank interest on the change in the best found
profit is very low. For example, 10% increase in Ib results in less than 0.04% change in the optimal profit.
Fig. 12 points towards the expected direct relationship between the percentage changes in the percentage of discount on
unit cost (Ic ) and the percentage changes in best found profit. However, compared to the effects of ‘changes in p’ on ‘changes
904 R.K. Gupta et al. / Mathematical and Computer Modelling 49 (2009) 893–905

Fig. 11. Bank interest (Ib ) versus best found profit (Z ).

Fig. 12. The percentage of discount on unit cost (Ic ) versus best found profit (Z ).

in best found profit’ or ‘the changes in D’ on the ‘changes in best found profit’, the effect of ‘changes in Ic ’ on the changes in
optimal profit is pretty low. For example, 10% increment in Ic induces only around 2% increment on the optimal profit.

8. Conclusion

In this paper, we have developed an inventory model with the incorporation of the effect of AP by the retailer to the
wholesaler and considering the inventory costs as interval valued numbers. Here the modified definitions developed recently
by Mahato and Bhunia [15] about the order relations have been used with respect to the point of view of pessimistic decision-
making for the selection of better chromosomes for the next generation as well as for finding the best chromosome in each
iteration. We have assumed the demand rate to be uniform and have also made the assumption that during stock-out period
the demand rate decreases by a fraction, as because of unavailability of goods (when shortages occur), a fraction of customers
switch over to a different shop for purchasing the goods due to their urgency and other reasons.
For future research, this model can further be generalized to include the case of deteriorating items, multi-storage
facilities and variable demand.

Acknowledgements

The second author would like to acknowledge the support of Research Project provided by the Council of Scientific and
Industrial Research (C.S.I.R), India, for conducting this work.

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