A Production Inventory Model for Deteriorating Items with Alternating Replenishment Rates and Backlogging of Demand

P.N.Gupta and Nisha Arora

Department of Mathematics and Statistics J.N.V University, Jodhpur-342001 (India)

Abstract
In this article, a production inventory model with deterioration of items is studied for different demand patterns. The production rate is changing at a particular time point. Production rate changes due to change in demand, fluctuations in the market and some other constraints. The model is investigated for demand as a linear function of time as also for uniform rate of demand. The shortages are taken into consideration. Some special cases are also discussed. An attempt has been made to illustrate the result with the help of numerical examples.

Key Words: Alternating Replenishment, Deterioration.

Introduction
In production inventory system different models with constant production rate are studied. However, there are situations in which production rate changes with time. Demand for an item is not always the same. For example, demand for winter wears, raincoats etc. is maximum in the respective season. Sometimes, due to market fluctuations, it is not advisable to have uniform rate of production. Therefore, it is essential to investigate the inventory models with different production rates. In this area, a large number of mathematical models have been reported in the existing literature. Deb and Chaudhuri [1] considered the finite rate of production. Bhunia and Maiti [2] have examined two models: in one model, the production rate depends on the on hand inventory level and in another; it is a function of demand rate. Billington [3] has considered the EOQ model without backorders. Ouyang, Chen, and Chang [4] have analysed the continuous inventory system allowing partial backlogging of demand. Nobel and Headen [5] have studied a stochastic inventory model with two discrete production rates. Perumal and Arivarignan [6] have analysed an inventory model with two different rates of production. Sivakumar and Arivarignan [7] have investigated an inventory model with multiple rates of production.

The models with time dependent demand and deterioration have been studied and explored by a number of researchers. Dave and Patel [8] were the first to study a linearly increasing demand pattern for a deteriorating inventory, not allowing shortages, over a finite planning horizon. Sachan [9] extended their model by allowing shortages except in the last cycle where shortages were not allowed. Bhunia and Maiti [10] presented a model for perishable products with linearly increasing demand and shortages over a finite planning horizon. Later, Chung and Tsai [11] developed an inventory system with deteriorating items and linear trend in demand, taking account of time value. Sen and Chakrabarty [12] considered a model for deteriorating items with alternating replenishments and constant demand. In the present paper, we have discussed an inventory model with deterioration where production rate is assumed to alter at a known point of time in the production cycle. Here we have analysed three cases. In case (A) we have studied the model for items which deteriorate according to a special form of Weibull density function with demand rate as a linear function of time. In case (B) time dependent linear demand rate and uniform rate of deterioration are taken into consideration. In case (C) the model for uniform demand rate and uniform rate of deterioration is investigated. Special cases are also discussed. All the results are illustrated numerically.

Model Development
The following figure describes the present inventory model. Initially, the inventory level is zero. Production starts at t = 0 at the rate of K1 units per unit time. At the same time supply also starts to satisfy market demand. At t = z, the stock level reaches P units and then production rate becomes K 2 units per unit time which continues upto time t = t, where stock level is Q units, considering the demand rate same as before .The production is then stopped. Simultaneously the deterioration factor (t) also works during the period (0,t1).The inventory level decreases mainly to meet up the demand and partly for deterioration. By this process stock level reaches zero at t = t1. Now shortages occur and accumulate to the level S at the time t = t2 and production starts again at the rate of K1 units per unit time. The backlog is cleared at t = T. The cycle repeats itself after time T.

Figure 1 2

CASE (A)

Assumptions and Notations

1. The demand rate R is a R = a+bt , t > o. 2. The production rates K1, K2 (>R) are finite. 3. The lead time is zero. 4. The cycle time T is fixed. 5. The inventory carrying cost is C1 per unit per unit time. 6. The shortage cost is C2 per unit per unit time. 7. C3 is the cost of each deteriorated unit per unit time. 8. C4 is the fixed set-up cost of inventory. 9. In this case (t) is assumed in the form (t) = 0t 0 0 1 t > 0. linear function of time.

The Model
Let I (t) denote the inventory level of the system at time t ( 0 t T ). The differential equations describing the system in the interval (0, T) are given by + 0 t I (t) = = = = = Using the conditions I (0) = 0 , I (z) = P , I (t) = Q , I (t1) = 0 , I (t2) = S , I (T) = 0, the solutions of equations (1), (2), (3), (4) and (5) are given below in equations (6), (7), (8), (9) and (10) respectively. I (t) = (K1 - a)(t - 0t3/3) - b(t2/2 - 0t4/8) 3 ; 0tz ------(6) K1 - ( a + bt ) K2 - ( a + bt ) - ( a + bt ) ( a + bt ) ; ; ; ; ; 0tz z t t t t t1 t1 t t 2 t2 t T ------(1) ------(2) ------(3) ------(4) ------(5)

K1 - (a +bt )

I (t) = P{1+ 0(z2 - t2)/2} + (K2 - a){(t - z) - 0(2t3 + z3 - 3zt2)/6} b{(t2 - z2) - 0(t2 - z2)2/4}/2 I (t) = a{(t1 - t) + 0(t13 + 2t3 - 3t2t1)/6} + b{(t12 - t2) + 0(t12 - t2)2/4}/2 I (t) = S + a(t2 - t) + b(t22 - t2)/2 I (t) = (K1 - a)(t - T) + b(T2 - t2)/2 From equation (6), using I (z) = P, we get P = (K1 - a)(z - 0z3/3) - b(z2/2 - 0z4/8) From equation (8), using I (t) = Q & t = t1, where 0 1, we get Q = a{t1(1 - ) + 0t13(1+ 2 3 - 32)/6} + b{t12(1 - 2) + 0 t14(1 - 2)2/4}/2 From equation (10), using I (t2) = S & t2 = T, where 0 1, we get S = - T(K1 - a)(1 - ) + bT2(1 - 2)/2 Total number of deteriorated items D = + ------(14) ------(13) ------(12) ------(11) ; ; ; t t t1 t1 t t 2 t2 t T ------(8) ------(9) ------(10) ; z t t ------(7)

= K1z + K2(t1-z) at1 bt12/2 The average total cost per unit time in (0,T) is C (z,t,T) = [ C1{ - C2 { + + + } } + C3D + C4 ] / T

= C1[ (K1 - a){(zt1 - z2/2) + 0( - z4 + 2z3t1 2z3t13)/12} + (K2 - a){(z - t1)2/2 0( 4t14 z4 + 2z3t1 2z3t13)/12} + a (1 - )2 {t12/2 + 0t14(1 - 2)/12} + b{t13(2 - 3)/6 + 0t15(8 - 15 + 103)/120} ] /T + C2 [ (K1 - a)(1 - )(T2/2 Tt1 + T2/2) - a(T t1)2/2 b(t13 + 2T3 3T2t1)/6 ] / T + C3 [ K1z + K2(t1 z) at1 - bt12/2 ] / T + C4 / T

We now minimize the average total cost per unit time C (z,t,T) under the assumption that z is a known point of time. Since z < t1 , we take z = t1 where 0 < < 1. So the cost function reduces to C (t1,T) = C1 [ (K1 - a){( - 2/2)t12 + 0t14( - 4 + 2 3 23)/12} + (K2 - a){( - )2t12/2 0 t14 ( 4 4 + 2 3 2 3)/12} + a (1 - )2 {t12/2+ 0t14(1- 2)/12} + b{t13(2 - 3)/6 + 0t15(8 - 15 + 103)/120} ] /T + C2 [ (K1 - a)(1 - )(T2/2 Tt1 + T2/2) - a(T t1)2/2 b(t13 + 2T3 3T2t1)/6 ] / T + C3 [ {(K1 K2) + K2 a}t1 - bt12/2 ] / T + C4 / T For minimum total cost we must have ------(15)

These conditions give two non-linear equations in t1 and T given by A1C1t13 + A2t1 + A3t12 + A4t14 +C2bT2/2 A5C2T + A6C3 = 0 B1t14 + B2t12 + B3t1 B4T2 + B5t13 B6t15 + 2C2bT3/3 + C4 = 0 Where A1 = 0 [(K2 K1) (4 - 2 3 + 23) K24 + a (1 - 2 + 23)] / 3 A2 = C1 [(K2 K1) (2 - 2) + K22 + a (1-2)] C2a C3b A3 = b [C1(2 - 3) C2] / 2 A4 = b0 (8 - 15 + 103) / 24 A5 = K1 (1 ) a A6 = (K1 K2) + K2 a B1 = C1 0 [(K2 K1) (4 - 2 3 + 23) K24 + a (1 - 2 + 23)] / 12 B2 = C1 [(K2 K1) (2 - 2) + K22 + a (1 - 2)] /2 C2a/2 C3b/2 B3 = C1 [(K1 K2) + K2 a] C2bT2/2 B4 = C2[K1 (1 2) a]/2 B5 = b[C1(2 - 3) C2]/6 B6 = - C1b0 (8 -15 + 103) / 120 ------(16) ------(17)

Solving equations (16) and (17) by Newton- Raphson method, we get the optimum values t1* and T* of t1 and T. The average cost will be minimum for t1* and T*, if 1. 2. 3. > 0

Special Case
If we take a = R and b = 0, i.e., constant demand rate R, then the average cost reduces to C (t1,T) = C1 [ (K1 - R){( - 2/2)t12 + 0t14( - 4 + 2 3 23)/12} + (K2 - R){( - )2t12/2 0 t14 ( 4 4 + 2 3 2 3)/12} + R (1 - )2 {t12/2 + 0t14(1- 2)/12} ] /T + C2 [ (K1 - R)(1 - )(T2/2 Tt1 + T2/2) - R(T t1)2/2] / T + C3 t1 [ (K1 K2) + K2 R ] / T + C4 / T This is same as obtained by Sen and Chakrabarty (13).

Illustration

Taking C1 = 0.1 Rs. per unit per unit time. C3 = 0.2 Rs. per unit per unit time. C4 = 100 Rs. per set-up. K1 = 150 units per unit time. K2 = 200 units per unit time. 0 = 0.01

C2
0.75 0.75 0.8 0.8 0.85 0.85

a
80 80 80 80 80 80

b
0.3 0.3 0.3 0.3 0.3 0.3

0.2 0.5 0.2 0.5 0.2 0.5

0.5 0.2 0.5 0.2 0.5 0.2

0.9 0.9 0.9 0.9 0.9 0.9

t1
6.42 5.21 6.37 5.18 6.32 5.16

T
7.26 5.97 7.24 5.97 7.22 5.96

Cost
29.94 21.46 30.10 21.62 30.27 21.77

Table - A

CASE (B)

Assumptions and Notations

1. The demand rate R is uniform and constant.

2. The rate of deterioration (t) is assumed constant, say, 0.

Other assumptions and notations are same as in case (A).

The Model
Let I (t) denote the inventory level of the system at time t ( 0 t T ). The differential equations describing the system in the interval (0, T) are given by + 0 I (t) = = = = = Using the conditions I(0) = 0 , I(z) = P , I(t) = Q , I(t1) = 0 , I(t2) = S , I (T) = 0, the solutions of equations (1), (2), (3), (4) and (5) are given below in equations (6), (7), (8), (9) and (10) respectively. I (t) = I (t) = I (t) = I (t) = I (t) = (K1 - R)(t - 0t2/2) P {1+ 0(z - t)} + (K2-R){(t - z) - 0(t - z)2/2} R{(t1 - t) + 0(t1 t)2/2} S + R(t2 - t) (K1 - R)(t - T) 8 ; ; ; ; ; 0tz z t t t t t1 t1 t t 2 t2 t T ------(6) ------(7) ------(8) ------(9) ------(10) K1 - R K2 - R - R - R K1 - R ; ; ; ; ; 0tz z t t t t t1 t1 t t 2 t2 t T ------(1) ------(2) ------(3) ------(4) ------(5)

From equation (6), using I (z) = P, we get P = (K1 - R)(z - 0z2/2) From equation (8) using I (t) = Q & t = t1, where 0 1, we get Q = R{ t1 (1-) + 0 t12 (1 )2/2} From equation (10) using I (t2) = S & t2 = T, where 0 1, we get S = - T (K1 - R)(1 - ) Total number of deteriorated items D = + ------(14) -----(13) ------(12) ------(11)

= K1z + K2 (t1 - z) Rt1 The average total cost per unit time in (0,T) is C (z,t,T) = [ C1{ - C2 { + + + } } + C3D + C4 ] / T

= C1 [ (K1 - R){(zt1 - z2/2) + 0( - z3 + 3z2t1 3z2t12)/6} + (K2 - R){(z - t1)2/2 + 0(z - t1)3/6} + R {(1-)2 t12/2+ 0t13(1- )3/6} ] /T + C2 [ (K1 - R)(1 - )(T2/2 Tt1 + T2/2) - R(T t1)2/2 ] / T + C3 [ (K1 K2)z + K2t1 Rt1 ] / T + C4 / T We now minimize the average total cost per unit time C (z,t,T) under the assumption that z is a point of time. Since z < t1 , we take z = t1 where 0 < < 1. So the cost function reduces to C (t1,T) = C1 [ (K1 - R){( - 2/2)t12 + 0t13( - 3 + 32 32)/6} + (K2 - R){( - )2t12/2 + 0 t13( )3/6} + R {(1 - )2 t12/2+ 0t13(1- )3/6} ] /T + C2 [ (K1 - R)(1 - )(T2/2 Tt1 + T2/2) - R(T t1)2/2 ] / T + C3 t1 [ (K1

known

K2) + K2 R ] / T + C4 / T

------(15)

For minimum total cost we must have

These conditions give two non-linear equations in t1 and T given by A1C1t12 + A2C1t1 - C2Rt1 A3C2T + A4C3 = 0 B1t13 + B2t12 + B3t1 B4T2 + C4 = 0 Where A1 = 0 [(K2 K1) (3 + 32 - 32) K23 + R (1 - 3 + 32)] / 2 A2 = (K2 K1) (2 - 2) + K22 + R (1-2) A3 = K1 (1 ) R A4 = (K1

------(16) ------(17)

K2) + K2 R

B1 = C1 0 [(K2 K1) (3 + 32 - 3 2) K23 + R (1 - 3 + 32)] / 6 B2 = C1 [(K2 K1) (2 - 2) + K22 + R (1-2)] /2 C2R/2 B3 = C3 [(K1 K2) + K2 R] B4 = C2[K1 (1 2) R]/2 Solving equations (16) and (17) by Newton- Raphson method, we get the optimum values t1* and T* of t1 and T. The average cost will be minimum for t1* and T*, if 1. 2. 3. > 0

Illustration

Taking C1 = 0.1 Rs. per unit per unit time. C3 = 0.2 Rs. per unit per unit time. C4 = 100 Rs. per set-up. K1 = 150 units per unit time. K2 = 200 units per unit time. 0 = 0.01 10

C2
0.75 0.75 0.8 0.8 0.85 0.85

R
80 80 80 80 80 80

0.2 0.5 0.2 0.5 0.2 0.5

0.5 0.2 0.5 0.2 0.5 0.2

0.9 0.9 0.9 0.9 0.9 0.9

t1
6.24 5.30 6.17 5.26 6.10 5.21

T
7.10 6.14 7.05 6.12 7.01 6.09

Cost
29.91 21.16 30.08 21.33 30.26 21.51

Table - B

11

CASE (C)

Assumptions and Notations

Here the rate of deterioration is taken as a constant, say, =0. All other assumptions and notations are same as in case (A).

The Model
Let I (t) denote the inventory level of the system at time t ( 0 t T ). The differential equations describing the system in the interval (0, T) are given by + 0 I (t) = = = = = Using the conditions I (0) = 0 , I (z) = P , I (t) = Q , I (t1) = 0 , I (t2) = S , I (T) = 0, the solutions of equations (1), (2), (3), (4) and (5) are given below in equations (6), (7), (8), (9) and (10) respectively. I (t) = (K1 - a)(t - 0t2/2) - b(t2/2 - 0t3/6) ; 0tz ------(6) K1 - ( a + bt ) K2 - (a + bt ) - (a + bt ) - ( a + bt ) K1 - (a +bt ) ; ; ; ; ; 0tz z t t t t t1 t1 t t 2 t2 t T ------(1) ------(2) ------(3) ------(4) ------(5)

I (t) = P{1 + 0(z - t)} + (K2 - a){(t - z) - 0(t - z)2/2} b{(t2 - z2)/2 - 0(2z3 + t3 - 3z2t)/6} ; z t t t t t1 ------(7) ------(8) ------(9) ------(10)

I (t) = a{(t1 - t) + 0(t1 - t)2/2} + b{(t12 - t2)/2 + 0(2t13 - 3t12t + t3)/6} ; I (t) = S + a(t2 - t) + b(t22 - t2)/2 I (t) = (K1 - a)(t - T) + b(T2 - t2)/2 ; ; t1 t t 2 t2 t T

12

From equation (6), using I (z) = P, we get P = (K1 - a)(z - 0z2/2) - b(z2/2 - 0z3/6) From equation (8), using I (t) = Q & t = t1, where 0 1, we get Q = a{ t1(1 - ) + 0t12(1 )2/2} + b{t12(1 - 2) + 0 t13(2 - 3 + 3)/3}/2 From equation (10), using I (t2) = S & t2 = T, where 0 1, we get S = - T(K1 - a)(1 - ) + bT2(1 - 2)/2 Total number of deteriorated items D = + ------(14) ------(13) ------(12) ------(11)

= K1z + K2(t1-z) at1 bt12/2 The average total cost per unit time in (0,T) is C (z,t,T) = [ C1{ - C2 { + + + } } + C3D + C4 ] / T

= C1[ (K1 - a){(zt1 - z2/2) + 0( - z3 + 3z2t1 3z2t12)/6} + (K2 - a){(z - t1)2/2 + 0(z - t1)3/6} + a{(1 - )2 t12/2+ 0t13(1 )3/6} + b{t13(2 - 3)/6 + 0t14(3 - 8 + 62)/24} ] /T + C2 [ (K1 - a)(1 - )(T2/2 Tt1 + T2/2) - a(T t1)2/2 b(t13 + 2T3 3T2t1)/6 ] / T + C3 [ K1z + K2(t1 z) at1 - bt12/2 ] / T + C4 / T We now minimize the average total cost per unit time C (z,t,T) under the assumption that z is a known point of time. Since z < t1 , we take z = t1 where 0 < < 1. So the cost function reduces to C (t1,T) = C1 [ (K1 - a){( - 2/2)t12 + 0t13( - 3 + 32 32)/6} + (K2 - a){( - )2t12/2 + 0 t13( )3/6} + a{(1 - )2 t12/2+ 0t13(1- )3/6} + b{t13(2 - 3)/6 + 0t14(3 - 8 + 62)/24} ] /T + C2 [ (K1 - a)(1 - )(T2/2 Tt1 + T2/2) - a(T t1)2/2 b(t13 + 2T3 3T2t1)/6 ] / T + C3 [ {(K1 K2) + K2 a}t1 - bt12/2 ] / T + C4 / T 13 ------(15)

For minimum total cost we must have

These conditions give two non-linear equations in t1 and T given by A1t13 + A2t12 + A3t1 + C2bT2/2 A4C2T + A5C3 = 0 B1t14 + B2t13 + B3t12 + B4t1 B5T2 + 2C2bT3/3 + C4 = 0 Where A1 = C1b0 (3 - 8 + 62)/6 A2 = C1 [0{(K2 K1) (3 - 32 + 32) K23 + a (1 - 3 + 32)} + b(2 - 3)]/2 C2b/2 A3 = C1 [(K2 K1) (2 - 2) + K22 + a (1-2)] C2a C3b A4 = K1 (1 ) a A5 = (K1 K2) + K2 a B1 = C1b0 (3 - 8 + 62)/24 B2 = C1 [0{(K2 K1) (3 - 32 + 32) K23 + a (1 - 3 + 32)} + b(2 - 3)]/6 C2b/6 B3 = [C1{(K2 K1) (2 - 2) + K22 + a (1-2)} C2a C3b]/2 B4 = C3[(K1 K2) + K2 a] C2bT2/2 B5 = C2[ K1(1 2) a]/2 Solving equations (16) and (17) by Newton- Raphson method, we get the optimum values t1* and T* of t1 and T. The average cost will be minimum for t1* and T*, if 1. 2. 3. > 0 ------(16) ------(17)

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Special case
If we take a = R and b = 0, i.e., constant demand rate R, then the average cost reduces to C (t1,T) = C1 [ (K1 - R){( - 2/2)t12 + 0t13( - 3 + 32 32)/6} + (K2 - R){( - )2t12/2 + 0 t13( )3/6} + R{(1 - )2 t12/2+ 0t13(1- )3/6} ] /T + C2 [ (K1 - R)(1 - )(T2/2 Tt1 + T2/2) - R(T t1)2/2 ] / T + C3 t1 [ (K1 K2) + K2 R ] / T + C4 / T The result is same as obtained in case (B).

Illustration
Taking C1 = 0.1 Rs. per unit per unit time. C3 = 0.2 Rs. per unit per unit time. C4 = 100 Rs. per set-up. K1 = 150 units per unit time. K2 = 200 units per unit time. 0 = 0.01

C2
0.75 0.75 0.8 0.8 0.85 0.85

a
80 80 80 80 80 80

b
0.3 0.3 0.3 0.3 0.3 0.3

0.2 0.5 0.2 0.5 0.2 0.5

0.5 0.2 0.5 0.2 0.5 0.2

0.9 0.9 0.9 0.9 0.9 0.9

t1
6.29 5.30 6.22 5.26 6.16 5.23

T
7.14 6.12 7.10 6.10 7.05 6.08

Cost
29.75 21.12 29.92 21.28 30.09 21.45

Table - C
15

Conclusion
While going through the values presented in the tables (table A, B and C), it can be concluded that 1. The average total cost increases with the increase in shortage cost. The cost reduces if we take the higher production rate K2 for smaller length of time in comparison to the case if we take lower production rate K1 for smaller length of time. 2. The behavior of cycle time T and the no shortage time t1 are opposite to the behavior of the average total cost, i.e., the cost increases when the cycle time and no-shortage time decreases simultaneously.

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References
1. Deb M. & Chaudhuri K.S. (1986): An EOQ model for items with finite rate of production and variable rate of deterioration. Opsearch 23,175-181. 2. Bhunia A.K. and Maiti M. (1997): Deterministic inventory models for variable production. Journal of Operations Research 48,221-224. 3. Billington P.J. (1987): The classical economic production quantity model with set-up cost as a function of capital expenditure. Decision Science 18,25-42. 4. Ouyang L.Y., Chen C.K. and Chang H.C. (1999):Lead time and ordering cost reductions in continuous review inventory system with partial back orders. Journal of Operations Research Society 50,1277-1279. 5. Nobel R.D. & Headen M. (2000): A lost-sales production/Inventory model with two discrete producton modes. Stochastic Models 16,453-478. 6. Perumal V. & Arivarignan G. (2002): A production model with two rates of productions and backorders. International Journal of Management System 18,109-119. 7. Shivakumar B. & Arivarignan G. (2005): Inventory model with multiple rates of production. Opsearch 42,126-133. 8. Dave U. & Patel L.K. (1981): (T,Si) policy inventory model for deteriorating items with time proportional demand. Journal of Operational Research Society 32,137-142. 9. Sachan R.S. (1984): On (T,Si) policy inventory model for deteriorating items with time proportional demand. Journal of Operational Research Society 35,1013-1019. 10. Bhunia A.K. & Maiti M. (1999): An inventory model of deteriorating items with lot-size dependent replenishment cost and a linear trend in demand. Applied Mathematical Modeling 23,301-308. 11. Chung K.J. and Tsai S.F. (2001): Inventory systems for deteriorating items with shortage and a linear trend in demand taking account of time value. Computers and Operations Research 28,915934. 12. Sen S. & Chakrabarty T. (2007): An order level inventory model with variable rate of deterioration and alternating replenishing rates considering shortages. Opsearch 44,17-26.

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