1999 IEEE International Fuzzy Systems Conference Proceedings

August 22-25, I999, Seoul, Korea

Optimization of Fuzzy Simple Inventory Models

Shan Huo C h e i and Chih Hsun Hsieh**

Department of Shipping and Transportation Management, National Taiwan Ocean University,
2, Peining Rd., Keelung, 20224 Taiwan, Republic of China.
(E-Mail: shchen@ntou66.ntou.edu.tw)
Department of Information Management, Tamsui Oxford University college,
32, Chen-Li street, Tamsui 251, Taipei, Taiwan, Republic of China.
(E-Mail: jury@jupiter.touc.edu.tw.)

Abstract 2.1 Graded mean integration representation method

In this paper, we introduce two fuzzy simple
inventory models with fuzzy parameters and fuzzy
A generalized fuzzy number x
is described as any
variables that are generalized trapezoidal fuzzy numbers. fuzzy subset of the real line R, whose membership function
We use Second Function Principle, graded mean pi satisfies the following conditions.
integration representation method, and Extension of the (1) p i ( x ) is a continuos mapping from R to the
LaGrangean method to find optimal fuzzy economic order closed interval [0, I],
quantities of each fuzzy inventory models. The solutions of (2) pi (x) =o, -03 < x 5 c,
fuzzy inventory models are quit well and can be specified (3) L(x) is strictly increasing on [c, a],
to meet the classical inventory models by using these (4) pi (x) =w, a 5 x -< b,
useful and executable methods. Another excellent result is (5) R(x) is strictly decreasing on [b, d],
that the economic order quantities of fuzzy inventory (6) p i (x) =O, d 5 x < 00,
model with crisp order quantity, and with fuzzy order where O<w<l, c, a, b, and d are real numbers.
quantity are all crisp real number.
- We denote this type of generalized fuzzy number as
A = (c, a, b, d; w ) ~ ~When . w=l, we simplify the
Keywords: Fuzzy; Fuzzy inventory; Inventory; Economic notation as A = (c, a, b, d)LR.
order quantity; Second Function Principle
In 1998, Chen and Hsieh introduced the graded mean
integration representation method of generalized fuzzy
1. Introduction number based on the integral value of graded mean h-level
of generalized fuzzy number. Here, we describe its’
In the classical inventory model, the annual inventory meaning as follow.
operating cost (C) is C=E(D/Q)+A(QR) where order Let L-’ and R-’ are the inverse function L and R
quantity (Q), order cost (E), inventory cost (A), and respectively, then the graded mean h-level value of
yearly demand (D) are real numbers. Furthermore, the generalized fuzzy number = (c, a, b, d; w ) is~ h(L-’(h)
~
optimal economic order quantity is Q*=(2ED/A)ln.
+ R-’(h))/2 as Figure 1. Then the graded mean integration
In 1987, Park [3] used fuzzy set concepts to treat the
inventory problem with fuzzy inventory cost under representation o f i i is
arithmetic operations of Extension Principle. Now, we
introduce the fuzzy inventory models with crisp order
quantity, and with fuzzy order quantity. Chen’s Second
Function Principle [I] is used as the fuzzy arithmetical where O<h<w and O<w<l.
The generalized trapezoidal fuzzy number B is a
-
operations of generalized trapezoidal fuzzy numbers to
calculate fuzzy total inventory cost. Furthermore, we use
graded mean integration representation method of Chen
-
special case of generalized fuzzy number, and be denoted
as B = (c, a, b, d; w). Its’ corresponding graded mean
and Hsieh 121 ( I 998) to represent fuzzy total inventory cost. integration representation is
The algorithm of Extension of the LaGrangean method [4]
is used to solve the fuzzy inventory model with fuzzy order
quantity.
p(E = 6;1~ c + d + ( a - c - d + b)h/w
2
)dh/ b d h

- c + 2 a + 2 b + d
-
2. Methodology
6

0-7803-5406-0/99/$10.00 ‘1999 IEEE 1-240

 T
1
-
A

/ I \
h.

ih
I
I I

i II i! >
0' c L-l(h) a h(L"(h)+R-'(h))R b R*l(h) d X
-
Fig 1. The graded mean h-level value of generalized fuzzy number A = (c, a, b, d; w ) ~ ~

2.2 Second Function Principle a,-b,, b,-a,, di-c2 ; w).

In 1985, Chen proposed Second Function Principle to
be as the fuzzy arithmetical operations between
generalized trapezoidal fuzzy numbers. Because it does not
change the type of membership function of generalized
fuzzy number after fuzzy arithmetical operations; it
reduces the trouble and tediousness of operations. We
describe the definition of Second Function Principle for
generalized trapezoidal hzzy numbers as following again.
Definition 1. Let g be an arithmetical operation mapping
from n-dimension real numbers Rn into real line R, f, is a
corresponding mapping from n-dimension fuzzy numbers
into fuzzy numbers, and X I = (c, , a, , b, , 4; w,), i=l, 2;-,
n be n generalized fuzzy numbers, each belonging to
trapezoidal fuzzy number family FI. The generalized fuzzy
number in R induced from n generalized fuzzy
numbers ;i; through function fg is
I inequality constraints. The general idea of extending the
- Lagrangean procedure is that if the unconstrained optimum
fg( I, '-, A ,) = 5 = (c , a , b , d; w),
where, w =min{w,, i=l, 2, .-, n}, T ={g(x,, ..., x,) x,=c, or
d, , i=l, 2 , .-, n}, T,={g(x,, -., x,,) I &=a, or b, , i=l, 2, ..., n},
c = min T, a= min T I , b = max TI, d = rnax T
In 1985, Chen [ I ] already proved the properties of the
fuzzy arithmetical operations with Second Function
-
Principle as follows
Suppose A ,= (c,, a,, b,, 4; w,) and =(cl, a,, b2,
d2; w2) are two generalized trapezoidal fuzzy numbers, w =
min{w,, w,). Then,
(1)The addition of and, is , I @ = ( cI+c2,,
al+a2,bi+b2,d,+d2 ; w), where c,, a,, b,, d,, c2, a,, b2, and d,
are any real numbers.
(2)The multiplication of ,
and A is , 8 , x
= (c, a,
b, d ; w), where T ={c,c,, cld2,d,c,, d,d, }, T,={a,al, a,b,,
b , a , b,b2 }, c = min T,a = min TI, b = max TI,d = max T.
If c,, a,, b,, d,, c3, a,, bl, and dl are all nonzero positive real
numbers. then .x , .x
8 ?= (c,c2, alaz,b,b:, d,dl ; w ) '
, ,
I 1 -
(4)1/X =, = (lld2, 1h2, I/%, l/c2; wJ, where c,, a,, b2,
and d, are all positive real numbers.
If c,, a,, b,, d,, c2 a,, b2, and d, are all nonzero positive real
,
numbers, then A 0 A = (c,/d,, all%,, b,/a,, dllc2; w).
(5) Let ER, then
2.3 Extension of the LaGrangean method
In [4], Taha discussed how to solve the optimum
solution of nonlinear programming problem with equality
constraints by using LaGrangean method, and showed how
the LaGrangean method may be extended to solve
of problem does not satisfy all constraints, the constrained
I optimum must occur at a boundary point of the solution
space. We describe Extension of the LaGrangean method
as follow.
Suppose that the problem is given by
Minimize y = f(x)
Subject to g,(x) 2 0, i = l , 3, ..., m
The nonnegativity constraints x 1 0, if any, are
included in the m constraints.
Then, the procedure of Extension of the LaGrangean
method involves the following steps.
Step 1 . Solve the unconstrained problem
Minimize y = f(x).
If the resulting optimum satisfies all the constraints, stop
because all constraints are redundant. Otherwise, set k=l
and go to step 2.
Step 2. Activate any k constraints (i.e., convert them into
equality) and optimize f(x) subject to the k acrive

(3) - A = (-d2, -b2, -a2, -c2 ; w,), then A €3 A = ( c,-d,, constraints by the LaGrangean method. If the resulting

1-241
solution is feasible with respect to the remaining
constraints, stop; it is a local optimum. Otherwise,
derivative of P( e ) with Q is
activate another set of k constraints and repeat the step. If
all sets of active constraints taken k at a time are
considered without encountering a feasible solution, go to
step 3.
Step 3. If k=m, stop: no feasible solution exists.
Otherwise, set k k + l and go to step 2.
I

3. Fuzzy Simple inventory models Let -= 0, it becomes

dQ
3.1 Fuzzy inventory model with crisp order quantity
--!-(e,d,+ 2e,d2+ 2eid3+ e4d4)+-1 (a,+ 2a2+ 2a3+ a,) = 0.
In order to simplify the treatment of the fuzzy Q? 2
inventory models, we introduce the gllowing variables:
0: fuzzy yearly demand, E :fuzzy order cost Hence, the optimal economic order quantity is
(dollars/order), :fuzzy inventory cost (dollars/item Q* = i 2 ( e , d l + 2e,d, + 2e,d, + e,d,)
year). (4)
a, +2a, +2a, + a ,
Here, we want to consider the fuzzy inventory model
with all fuzzy parameters and crisp order quantity. In When demand and costs are all real numbers, that is
addition, we use graded mean integration representation d 1=d 2=d 3=d 4=D > a l= a =a2 =a
3 =A
4 2 and e,=e,=e,=e,=E, then
7

method to represent fuzzy total cost, and use Second 12ED

Function Principle instead of Extension Principle as the Q*=, -
V A
fuzzy arithmetical operations of fuzzy total cost. Then the
fuzzy total cost of the fuzzy inventory model is
3.2 Fuzzy inventory model with fuzzy order quantity

In this section, we propose the fuzzy inventory model

by changing the crisp order quantity in previous inventory
where €3 and @ are fuzzy multiplication and addition
model into fuzzy order quantity.
operations with Second Function Principle, respectively. -
NOW,suppose fuzzy inventory cost Z = (a,, a?, a3, a,), Suppose fuzzy order quantity Q =(SI, q2, q,, 4,) with
fizzy yearly demand 6 = (dl, dl, d,, d,),fuzzy order cost 0 2 q, 2 q2Iqj5 q,, then the fuzzy total cost is
-E = (e,, e2, e,, e,), and fuzzy total cost C = (c,, cj, cj, c,)
are nonnegative trapezoidal fuzzy numbers. Then we solve E = E @ =B T @ X @0- . (6)
the optimal economic order quantity of formula (3) as
Q 2
We use graded mean integration representation
follows.
method, Second Function Principle, and Extension of the
By Second Function Principle, we get Lagrangean method to find the optimal fuzzy order
e = E @ B- @ x€3-Q quantity of formula (6) as follows.
By Second Function Principle, we get
Q 2
= ( e-, d+, 2Qa, 2 e2 d+ 2Qa, e , d , +Qa3 ,
Q 2 Q 2 Q 2
- el4
-(-+-,- qlal e 2 4 +-92a2 -+-,
e 3 4 93%
e,d? +L
Qa 1.
q4 2 q3 2 h - 2
Q 2
Then, the graded mean integration representation of -+-
41 2
Eis .
Then the graded mean integration representation of
-
P ( C ) = -1 (-+-L+-
e , d , Qa 2e,d, 2% ~ 2ejd, C is
6 Q 2 Q 2 Q
2Qa3 ~ e4d.4 I Qa,),
2 Q 2
In order to find the minimization of P( e), the
1-242
with 0 I q , I q22 q,< q4. Second, let all the above partial derivatives equal to zero,
and solve q , , q2, q3, and q,, then we get
It will not change the meaning of formula ( 7 ) if we
replace inequality conditions 0 I q, 2 q, I q3< q, into the 2(2e,d3 + e,d,)

.=i;.
following inequality. a, +2a,
9,- q , 2 0, q j - q2 t 0, and q, - q j t 0, where q , 2 0.
2e,d,
Next, we use Extension of the LaGrangean method to -
find the solutions of q , , q3, q,, and q4 to minimize P( ) in c Because the above results show that q4 < q3, it does
formula (7) as follows.
not satisfy the constraint 0 I q, I q2I q,< q,, therefore it is
Step 1. Solve the unconstraint problem, not a local optimum. Similarly we can get the same result
if we select any other one inequality constraint to be
equality constraint, therefore set k=2 and go to step 3.
Step 3. Convert the inequality constraints q2 - q , t 0 and
w, I 2q;a; I e,d, ~ q4a-I ), q, - q2 t 0 into equality constraints q2 - q , = 0 and q, - q2
Y

42 2 q, 2 = 0. We optimize P( C ) subject to q2 - q, = 0 and q, - q2

In order to fmd the minimization of

-
P(c),the
= 0 by the Lagrangean method.

c- ) with respect to q,, q2, q3, and q, are

First, the Lagrangean function is
derivatives of P(

-
dq;
2 a , -2e2d2
d~ = -
2 q3-
- 9 -
d~ = a , - e , d , ,
dq, 2 q4?
Then, let all the above.partia1 derivatives equal to zero, U q , - q,).
and solve ql, q., q;, and q4. Those are In order to find the minimization of L(q,, q,, q3, q4, hi,
h:), the derivatives of L(q,, q2. q;, q:, h,, h2)with respect to
q,, 42,q,, q4, AI, and 1 2 are

dP = 0, then q4
94
=
d2:P1
-.
Because the above results show that q , 2 42 t q, 2 q4,
dq, 6 2 9,-

it does not satisfy the constraint 0 2 q, 2 q, I 4,s q4,

therefore set k=l and go to step 2.
Step 2. Convert the inequality constraint q, - q , t 0 into
equality constrain q2 - q , = 0. and optimize P( ) subject c
to e - q, = 0 by the Lagrangean method.
First, the Lagrangean function is
Second, let all the above partial derivatives equal to
+ zero, and solve q,, q2, q,, and q,, then we get
94 2 q3 2
2(2e,d, + 2e;d3 + e,,d4)
qi=q2 = q3=
2e34 I e 4 4 I q4a4 ) -h(q,- q,). a , + 2a, + 2a,
q2 2 q, 2
Taking the partial derivatives of L(q,, q2, q,, q4, h)
with respect to q , , q2, q,, q4, and h to find the minimization
of U q , , q2, q3, q49 A), we get

,'2(2e2d2+ 3ejd, + e , d , ) >

"'j a , +2a2 +2a,

1-243

The above result q , > q4 does not satisfy the constraint
0 5 q, 5 qr 5 9;s q,, therefore it is not a local optimum.
Similarly we can get the same result if we select any other
two inequality constraints to be equality constraint,
therefore set k=3 and go to step 4.
Step 4. Convert the inequality constraints q,- q, 2 0, q3 -
q, 2 0, and q, - q; 2 0 into equality conskaints q,- q, = 0,
9j - q,= 0, and q4 - q3 = 0. We optimize P( ) subject to
q, - q, = 0, q, - q, = 0, and q4 - q3 = 0 by the Lagrangean
method.
First, the Lagrangean function is
L(q11 q2, q;, 94, A,,1 2 , A,)
1 e d q,a, 2e d +
2q,a,-2e.d 2q,a3 instead of Extension Principle as the fuzzy arithmetical
=-(A+-+- +A +-operations to simplify the calculation of the fuzzy total cost,
6 q4 2 q3 2 92 2 and use an excellent graded mean integration
In order to find the minimization of L(q,, q2, q3, q,, A,,
A,, AI), we take the partial derivatives of L(q,, q2, q3, q.,, A,,
A?, XI) with respect to q,, q,,q,, q4 , A,,h2, and A,. We
obtain
Second, let all the above partial derivatives equal to
zero, and solve ql, q,, q,, and q,, then we get
2(e,d, + 2e,d, + 2e,d, + e 4 d a )
4,=92 = q3= q4=
d a, + 2a2 + 2a, +a,
Because the above solution G= (q,, q2, q3, 9,)
satisfies all inequality constraints, the procedure terminates
with G as a local optimum solution to the problem.
Since the above local optimum solution is the only
one feasible solution of formula (7), so it is an optimum
solution of the inventory model with fuzzy order quantity
according to Extension of the LaGrangean method.
Since ql=qz=q3=q4,therefore the optimal fuzzy order
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-* .
quantity Q = (4, , q2', q3*,q4') is a real number, so we
can simplify the representation of as
4. Conclusion
In this paper, we use Second Function Principle
representation method to represent fuzzy total cost. In
addition, we use Extension of the LaGrangean method to
solve the optimal solutions of each h z z y inventory models.
By using the three good tools, we get quiet well solutions
as follows.
1. An economic order quantity of fuzzy inventory model
with crisp order quantity.
2. An economic order quantity of fuzzy inventory model
with fuzzy order quantity.
Furthermore, we pleasantly surprised find that the
solutions are all crisp numbers. It means that the fuzzy
inventory models are executable and useful in the real
world.
5. References
[ l ] S. H. Chen, Fuzzy linear combination of hzzy linear
hnctions under Extension Principle and Second
Function Principle, Tamsui Oxford Journal of
Management Sciences, Vol. 1, pp. 11-3 1 1985.
[2] S. H. Chen, and C. H. Hsieh, Graded mean integration
representation of generalized fuzzy numbers,
Proceeding of 1998 Sixth Conference on Fuzzy Theory
and Its Applications (CD-ROM), filename: 03 1.wdl, pp.
1-6, Chinese Fuzzy Systems Association, Taiwan,
Republic of China.
[3] K. S. Park, Fuzzy set theoretic interpretation of
economic order quantity, IEEE Transactions on Systems,
Man, and Cybernetics SMC-17, pp. 1082-1084 1987.
[4]H. A. Taha, Operations research, Prentice Hall, New
Jersey, USA, 1997, pp. 753-777.
[j]H. Tanaka, and P. Guo, Possibilistic Data Analysis for
Operations Research, Physica-Verlag (A Springer-
Verlag company), New York, USA, 1999.