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Abstract:- In the present article, an economic production quantity (EPQ) model is developed for deteriorating product with time dependent
demand and the time dependent inventory carrying cost. Here,it is assumed that the production rate at any instant depends on both the stock and
the demand of the product. To make the model more realistic, the shortages are allowed and partially backlogged. The backordering rate is taken
as a decreasing function of waiting time for the next refill.The main objective of the present study is to find the optimal total cost per unit time of
the production system. To validate the optimal resuts, numerical example is provided. To analyze the effect of variations in the optimal resuts
with respect to change in one parameter at a time, sensitivity analysis is carried out and the results are presented graphically.
Keywords EPQ , deterioration, variable carrying cost, stock and demand dependent production, shortage, and partial backlogging.
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INTRODUCTION
A major concern of inventory management is to know when and how much to order or manufacture so that the total cost of the
system per unit time is minimized.The economic production quantity (EPQ) model plays an important role on managing the
inventory effectively. Economic production quantity (EPQ) model is an extension of economic order quantity (EOQ) model. EOQ
model assumes that the quantity ordered will arrive immediately in the stock. On the other hand, EPQ model takes more realistic
approach assuming the orders are available or received in an incremental manner considering manufacturing company will
produce its own quantity or parts are going to be shipped to the company while being produced. Over the last few decades,
numerous researches have been done to extend the EPQ model making it closer to real life situations. Mandal and Phaujdar [1]
developed an economic production quantity model for deteriorating items with uniform production rate and linearly stock
dependent demand. Widyadana and Wee [2] developed an economic production quantity (EPQ) model for deteriorating items in
which production, rework, deterioration and demand rate are assumed constant. In reality, the demand rate of any product may
vary with time or with price or with the instantaneous level of inventory displayed in a supermarket.
One of the unrealistic assumption is that items stocked preserve their physical and chemical characteristics during their stay in
stock for a long period of time. Therefore,deterioration of the stored products is a key characteristic and its impact on modeling of
inventory systems cannot be neglected. Deterioration is defined as damage, decay or spoilage of the products that are stored for
future use, always loose their original value with passage of time. Inventory models for deteriorating items having multivariate
demand functions were also studied by several researchers. You [3] presented an inventory policy for products with selling price
and time dependent demand. Tsao & Sheen [4] considered dynamic pricing, promotion and replenishment policies for a
deteriorating item under permissible delay in payments. Models for deteriorating items having stock level and selling price
dependent demand rate were studied by Teng and Chang [5] and Khanra, et al. [6]. Pal, et al. [7] considered a single deteriorating
item with the demand rate dependent on displayed stock level, selling price of product and frequency of advertisement. Singh et
al.[8] presented a Mathematical production inventory model for deteriorating items with time dependent demand rate under the
effect of the inflation and shortages. Sivashankari and Panayappan [9] integrated a cost reduction delivery policy into a production
inventory model with defective items in which three different rates of production are considered. Singh et al. [10] developed an
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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integrated production inventory policy for perishable products with trade credit period and investment in preservation technology
in which production rate is taken as a function of demand rate.
In all these models, the production rate considered to be independent of both stock and demand of the product. But in reality if the
product is produced without considering the on hand stock and demand of the product, the situation may lead excess inventories
or heavy shortages. Therefore, it is the common practice in several of the industries dealing with deteriorating items, the
production rate is adjusted depending on the stock on hand and demand i.e. if more stock is there then the production rate is
reduced and if the less stock is there the production rate is increased. This type of production rate is known as stock and demand
dependent production. In this paper, an economic production quantity model for detriorating products with stock and demand
dependent production rate is developed and analyzed. Here, it is also assumed that the demand of the product and holding cost are
time dependent.To validate the optimal resuts, numerical example is provided. Finally, sensitivity analysis of optimal solution
with respect to the major parameters are also studied to draw some decisions.
ASSUMPTIONS
The Mathematical model of the production inventory problem is developed under the following assumptions.
NOTATIONS
The Mathematical model of the production inventory problem is developed under the following notations.
, demand parameters
a,b,c production parameters
h1 , h2 holding cost parameters
backlogging parameter
deterioration parameter, where 0 1
I t inventory level at any time t
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I 1 t inventory level at time t during the time interval 0,t1
I 2 t inventory level at time t during the time interval t1 ,t2
I 3 t inventory level at time t during the time interval t2 ,t3
I 4 t inventory level at time t during the time interval t3 ,T
I max maximum inventory level during the time period 0,T
Sb maximum shortage level of inventory during stock out period
p production cost per unit
s shortage cost per unit
l lost sale cost per unit
d deterioration cost per unit
O setup cost per production run
t1 the time at which production stops
t2 the time at which inventory level becomes zero and shortage starts
t3 the time at which production restarts to recover both the previous shortages and to
satisfy demand in the time period t 3 , T
T cycle time
T.C. total cost per unit time for a production cycle
MATHEMATICAL FORMULATION & SOLUTION OF THE MODEL
Inventory level
I max
t2 t3 T
0 Time
t1
Lost Sales
The
differential equations representing the inventory stattus are given by
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dI 1 t
I1 t Pt Dt ,0 t t1 (1)
dt
dI 2 t
I 2 t Dt ,t1 t t2 (2)
dt
dI 3 t
I 3 t t3 t Dt ,t2 t t3 (3)
dt
dI 4 t
I 4 t Pt Dt ,t 3 t T (4)
dt
I 1 t
a b 1 t b 1 e c t 1 a b 1 e c t ,0 t t1 (6)
c c 2 c
I 2 t
t2 t
e 1
t2 e t2 t t 2 1 e t2 t
,t1 t t2 (7)
I 3 t e t3 t2 1 e t t2 t2 te t t2 2 1 e t t2 ,t2 t t3 (8)
I 4 t a b 1 T t
b 1 T 2 t 2
,t 3 t T
(9)
2
With the help of equations (6) and (8), we get
I max I 1 t1
a b 1 t1 b 1 e c t1 1 a b 1 e c t1 (10)
c c 2 c
And the maximum level of stock out quantity
Sb I 3 t3
1 e t3 t2 t3 t2 e t3 t2 2 e t3 t2 1 (11)
The Total cost per unit time of the production system compromises the following components:
1
T.C. [Setup Cost +Production Cost + Holding Cost + Deterioration Cost + Shortage
T
Cost + Lost Sales Cost] (12)
c
b 1 t 2
a b T t1 t3 2 T t1 t3 c a b 1 t1
b 2 2 2
1
2
PC p (14)
cb 1 e c t1 c t 1 ca b 1 1 e c t1
c 3 1
c 2
1 2 1 a b 1
a b 1 t1 t1
c
2 c 2 e c t1 1 b 1 t1
h1 b 1 1 e c t1 t1 t 2 e t2 t1 1
c 3 2
t 2 t 2 t e t2 t1 t 1 e t2 t1
2 1 2 2 2
1 3
a b 1 2 b 1 t 2 a b 1 t e c t1 1
t1
t13 (15)
2 c 3 c 2 c 2 c 2 1
1
a b 1 t b 1 1 e c t1
1
1
e c t1
h c
3
c
4
2
t12 t 22 2 t1e t1 t2 t 2 3 e t2 t1 1 3 3
t1 t 2
2 3
2 2t1t 2 e
t2 t1
2t1 t 2 3 t 2 t1 e
2 2 t2 t1
4
2
d) Deterioration Cost: The cost associated with the deteriorated units can be calculated as
t
1
t2
DC d Pt dt Dt dt
0 0
a b 1 b 1 t 2
t1
c 2 c
1
a b 1 c t
DC d a b t1
b 2
t1 t 2 t22 c e 1 1 (16)
2 2 c 2
b 1
c
1 e c t1 b 1
2 1
t
2
c
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e) Shortage Cost: The shortage cost of the inventory production system is given by
t
3
T
SC s I 3 t dt I 4 t dt
t2 t3
t2 t3 e
t3 t2
2 1 e t3 t2 t2 t2 t3 e t3 t2
SC s 2 t3 t 2 e
t3 t2
t3 t2 e t3 t2
2
3 1 e
t3 t2
(17)
a b 1 b 1
T t3 2
T t3 2T t3
2
2 6
f) Lost Sales Cost: The cost arises due to the lost sales per production run during the stockout period can be calculated as
t
3
LSC l 1 t3 t Dt dt
t2
2 2 t3 t2 t3 t2
LSC l t3 t2
t3 t 2
e
2 1 e t3 t2 (18)
2
a b 1 t1 b 1 c t a b 1 e c t1
c
e 1 1
c
f t1 ,t2 c
2
0 (19)
e t2 t1 1 t2 e t2 t1 t1 1 e t2 t1
2
1 e t3 t2 t3 t2 e t3 t2
a b 1 T t3
g t2 ,t3 ,T b 1 2
e t3 t2 1
T t3
2 0 (20)
2
2
Hence, the total cost per unit time of the production system will be
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a b 1 t1
a b T t t b T 2 t 2 t 2 c
1 3
2
1 3
c b 1 2
t1
O p 2
cb 1 c t
ca b 1
c 3
e 1 c t1 1 1 e c t1
c 2
1
a b 1 t1 t1
2
1 a b 1 e c t1 1
c 2 c 2 b 1t1
b 1
h1 1 e c t1
t1 t 2 2 e
t2 t1
1
c 3
2 2
t1 t 2 2 t 2 e
t2 t1
t1 3 1 e
t2 t1
2
a b 1 2 b 1 2 a b 1 c t1 1
2 c t1 3 c t1 2 c 2 t1 c 2 t1 e
3
a b 1 t1 b 1
1 e c t1
1 e c t1
2 2
t1 t 2
h2 c 3 c 4 2
1
T.C.
T
2
t1 e
t1 t2
t 2 3
e
t2 t1
1
3 3
t1 t 2
3
2
2
2t1t 2 e t2 t1 2t12 t 22 3 t 2 t1 e t2 t1 4
2
a b t1 t1 t 2 t 2
b 2
2 2
a b 1 b 1 2 a b 1 c t1
d c t1 2 c t1 e
1
c c 2
b 1
1 e c t1 b 1
t1
c c
2 2
2
t 2 t3 e t3 t2 1 e t3 t2 t 2 t 2 t3 e t3 t2
s 2 t3 t 2 e t3 t2 t3 t 2 e t3 t2 3 1 e t3 t2
2
a b 1
T t3 2 b 1
T t3 2 2T t3
2 6
t3 t2 e t3 t2 1 e t3 t2
l t3 t 2 t32 t 22
2 2
(21)
From equation (21), we observe that the T.C. of this production inventoy system is a function of the decision variables
t1 ,t2 ,t3 , and T . With the help of the equations (19) and (20), we can find the value of t 2 and t 3 in terms of t1 and T .
Consequently, the T.C. of this production inventory model is a function of the decision variables t1 and T only.
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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The total cost of the production system per unit time will minimize if
T.C.
0 (22)
t1
T.C.
and 0 (23)
T
provided that 0
(24)
t12 T 2 t1T
Since the equations (22) and (23) are highly nonlinear, therefore for given set of parametric values, equations (22) and (23) can be
solved by Mathematica software.
NUMERICAL EXAMPLE
The following input data of different parameters are used to illustrate the model.
Substitute these optimal value in equations (10), (11), and (21) we get I max 3.95793 , Sb 1.4141 , and
T.C. 6.666705 1013 6.666705E 13
SENSITIVITY ANALYSIS
We will now perform the sensitivity analysis to examine the effects of changes in the input parameters
a, b, c, d, l, p, s, O, , , h1 , h2 , , and on the optimal results obtained in the model. Sensitivity analysis will be performed
by changing each of parameters by -40%,-20%,20% and 40%, and taking one parameter at a time and keeping the remaining
parameters unchanged. The results are shown in Table.1.
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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15
1 10
14
510 3
TC
0
14
-5 10
2
15
-1
10
-1
t1
0
1
T
2
0
3
14
210
14 3
1.5 10
TC
14
110
2
1
t1
1.5
1
T
2.5
0
3
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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Parameter % change in Change in Change in Change in Change in Change in
Parameter t2 t3 I max Sb T.C.
a -40 1.57967 2.64195 2.05478 1.28261 6.666705E+13
-20 1.57816 2.70296 3.00635 1.35804 6.666705E+13
0 1.57665 2.74613 3.95793 1.41410 6.666705E+13
+20 1.57515 2.77829 4.90951 1.45640 6.666705E+13
+40 1.57364 2.80317 5.86109 1.48958 6.666705E+13
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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h1 -40 1.57665 2.74613 3.95793 1.41410 6.666705E+13
-20 1.57665 2.74613 3.95793 1.41410 6.666705E+13
0 1.57665 2.74613 3.95793 1.41410 6.666705E+13
+20 1.57665 2.74613 3.95793 1.41410 6.666705E+13
+40 1.57665 2.74613 3.95793 1.41410 6.666705E+13
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6E+13
4E+13 a
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 b
2E+13 T.C.
0
-40% -20% 0% 20% 40%
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6E+13
4E+13 c
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 d
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 l
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 O
2E+13 T.C.
0
-40% -20% 0% 20% 40%
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6E+13
4E+13
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 h1
2E+13 T.C.
0
-40% -20% 0% 20% 40%
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6E+13
4E+13
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 p
2E+13 T.C.
0
-40% -20% 0% 20% 40%
6E+13
4E+13 s
2E+13 T.C.
0
-40% -20% 0% 20% 40%
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OBSERVATIONS:
On the basis of the results shown in table.1 and figures no. 4 to 31, the following observations can be made:
1. The shortage period t 3 , maximum positive stock level I max , and maximum shortage level Sb increase while the non
production period t 2 decreases with the increase in the value of the production parameter a . Therefore , The non
production period t 2 , shortage period t 3 , and maximum shortage level Sb are slightly sensitive and the maximum
positive stock level I max is highly sensitive to change in the production parameter a .
2. The non production period t 2 , and maximum positive stock level I max remain equal with the increase in the value of
the backlogging parameter . Therefore , The non production period t 2 , and maximum positive stock level I max are
insensitive to change in the backlogging parameter . The shortage period t 3 increases while maximum shortage level
Sb decreases with the increase in the value of the backlogging parameter . Therefore ,the shortage period t 3 , and
maximum shortage level Sb are slightly sensitive to change in the backlogging parameter .
3. The non production period t 2 , and maximum shortage level Sb increase while the shortage period t 3 , and the maximum
positive stock level I max decrease with the increase in the value of the demand parameter . Therefore , The non
production period t 2 , and shortage period t 3 are slightly sensitive ,the maximum shortage level Sb is moderately
sensitive , and the maximum positive stock level I max is highly sensitive to change in the demand parameter .
4. The non production period t 2 , shortage period t 3 , maximum positive stock level I max , and maximum shortage level
Sb are slightly changed with the increase in the values of the parameters b, c, , and . Therefore , The non
production period t 2 , shortage period t 3 , maximum positive stock level I max , and maximum shortage level Sb are
slightly sensitive to change in the parameters b, c, , and .
5. The non production period t 2 , shortage period t 3 , maximum positive stock level I max , and maximum shortage level
Sb remain equal with the increase in the values of the parameters d, l, O, h1 , h2 , p, and s . Therefore , The non
production period t 2 , shortage period t 3 , maximum positive stock level I max , and maximum shortage level Sb are
insensitive to change in the parameters d, l, O, h1 , h2 , p, and s .
6. The value of total cost per unit time T.C. of the system decreases with the increase in the value of the deterioration
parameter . Therefore, T.C. is highly sensitive to changes in the parameter .
7. The value of total cost per unit time T.C. of the system increases moderately with the increase in the values of the
parameters h2 ,and . . Therefore, T.C. is moderately sensitive to changes in the parameters h2 ,and .
8. The value of total cost per unit time T.C. of the system remains equal with the increase in the values in the parameters
a, b, c, d, l, O, , h1 ,, p,and s . Therefore, T.C. is insensitive to changes in the parameters
a, b, c, d, l, O, , h1 ,, p,and s .
CONCLUSION
The economic production inventory model developed here incorporates the following realistic features:
1. It is applicable to an inventory which deteriorates over time.
2. It is concerned with a linearly time varying demand of the product.
3. The product in the stock is manufactured at a stock and demand of the product dependent rate.
4. It is also concerned with the shortages of the product in the stock.
5. The product in the stock is stored at a time varying holding cost.
In this article, a production inventory model for deteriorating product with time dependent demand and holding cost has been
developed. The production rate is considered here as a function of stock and demand of the product. Here, shortages are allowed
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International Journal on Recent and Innovation Trends in Computing and Communication ISSN: 2321-8169
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and the rate of the backlogged demand decreases exponentially as the waiting time of the next replenishment increases. The
mathematical formulation to compute the different associated cost and total cost per unit time of the production system has been
presented. A numerical example has been given to illustrate the study. Finally, the sensitivity of the optimal results to changes in
the values of different parameters has been discussed and presended graphically.
For future scope, this model can be extended for different permissible delay in payments, different demand and time value of
money. It also can be extended in the fuzzy enviroments.
REFERENCES:
[1] Mandal, B.N., & Phaujdar, S.(1989). An inventory model for deteriorating items and stock-dependent consumption
rate. Journal of the Operational Research Society, 40(5),483488.
[2] Widyadana ,G. A. ,& Wee, H.M. (2012). An economic production quantity model for deteriorating items with multiple
production setups and rework. International Journal of Production Economics,138, 62-67.
[3] You, P.S. (2005). Inventory policy for products with price and time-dependent demands. Journal of the Operational
Research Society, 56(7), 870-873.
[4] Tsao,Y.C., & Sheen, G.W. (2008). Dynamic pricing, promotion and replenishment policies for a deteriorating item
under permissible delay in payments. Computers & Operations Research, 35, 3562 3580.
[5] Teng, J.T., & Chang, C.T. (2005). Economic production quantity models for deteriorating items with price and stock
dependent demand. Computers & Operations Research, 32, 297308.
[6] Khanra, S., Sankar, S., & Chaudhuri, K.S. (2010). An EOQ model for perishable item with stock and price dependent
demand rate. International Journal of Mathematics in Operations Research,2 (3), 320 335.
[7] Pal, A.K., Bhunia, A.K. & Mukherjee, R.N. (2006). Optimal lot size model for deteriorating items with demand rate
dependent on displayed stock level and partial backordering. European Journal of Operational Research, 175(2), 977-
991.
[8] Singh, S.R., Agarwal, A.,& Rani, S. (2015). Mathematical production inventory model for deteriorating items with time
dependent demand rate under the effect of inflation and shortages. International Journal of Computer & Mathematical
Sciences,4, 138-148.
[9] Sivashankari, C.K., & Panayappan, S.(2013). Production inventory model for three levels of production with
integrates cost reduction delivery policy. European Journal of Scientific Research, 116 (2), 271-286
[10] Singh, S.R., Tayal, S.,& Sharma, R. (2016). An integrated production inventory model for perishable products with
trade credit period and investment in preservation technology. International Journal of Mathematics in Operational
Research,8(2), 137-163.
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