EOQ and EPQ Production-Inventory Models with Variable

Holding Cost: State-of-the-Art Review

Hesham K. Alfares1*, Ahmed M. Ghaithan2

King Fahd University of Petroleum & Minerals

Dhahran 31261, Saudi Arabia
1. alfares@kfupm.edu.sa, 2. ahmedgh@kfupm.edu.sa
* Corresponding author

Abstract

In production-inventory control, economic order quantity (EOQ) and economic

production quantity (EPQ) models are used to determine the optimal order quantities for
purchasing and manufacturing. Most EOQ and EPQ models are constructed assuming constant
costs. Recently, however, EOQ/EPQ models assuming varying costs (i.e. holding, ordering, and
purchasing costs) have been receiving considerable attention. The objective of this paper is to
review and classify EOQ and EPQ inventory models formulated under the assumption of
variable holding costs. The relevant papers are reviewed and classified into three main types:
time-dependent holding cost, stock-dependent holding cost, and multiple dependence or other
holding cost variability. Additional classification is proposed for the reviewed models according
to their objectives, solution methods, and applications. The paper identifies research trends and
includes several suggestions for future research directions.

Keywords:
Inventory Control; Optimization; Lot Sizing; Modeling; Production Economics; Variable
Holding Cost.

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1. Introduction

Production and inventory management is an important function whose aim is to control

the materials used in manufacturing and services. The primary goal of this function is to keep the
right quantity of each material in order to satisfy demand while avoiding both shortages and
excess inventory. Traditional production-inventory models determine the optimal lot sizes and
order cycle needed to meet customer demands at minimum total cost. Earlier, most production-
inventory models proposed in the literature were built on the assumption of constant parameters.
Recently, however, production-inventory models with variable costs have been receiving
considerable attention.

Basic production-inventory models include the Economic Order Quantity (EOQ) model
for purchased materials, and the Economic Production Quantity (EPQ) model for manufactured
materials. The EOQ model, developed by Harris [1], is one of the oldest models in the inventory
analysis literature. The EOQ model has been formulated under the assumption of a constant
demand rate, constant holding cost, constant purchasing cost, and constant ordering cost. The
EOQ model is suitable for purchased items, as it assumes the instantaneous arrival of the whole
lot size (i.e. the complete order quantity). This assumption was revised by Taft [2], who
developed the economic production quantity (EPQ) model for manufactured items. In the EPQ
model, a new lot arrives gradually, as it is being manufactured according to a finite production
rate. Similar to the EOQ model, the EPQ model is based on the assumption of constant demand
and constant costs, including the holding cost.

Obviously, the assumption of variable input parameters (i.e., demands and costs) is more
representative of many real-life production-inventory control situations. At the same time,
models considering the variability of these parameters are more sophisticated and challenging.
Currently, these models have reached a state of maturity in terms of quantity and quality, and
have formed a large and distinctive area of research. The objective of this paper is to review and
classify the recent literature in this emerging and important area of research. This is the first
literature review specifically focusing on production-inventory control models assuming variable
holding costs. The aim is to assist researchers and practitioners to develop their work in this
evolving area.

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 Due to the existence of several compelling factors, holding cost variability is both a
necessary and a realistic assumption in many practical inventory situations. Quite often, the
holding cost increases with time because extended storage durations require more sophisticated
and expensive storage facilities. For example, the long-term storage of food and pharmaceuticals
requires refrigeration and special arrangements are needed to avoid spoilage. Similarly, volatile
and flammable liquids need additional care and more stringent safety conditions for long-term
storage. The unit holding cost also often increases with the inventory level, i.e. the quantity of
stored items. The greater the amount of stored items, the longer the average time spent in
inventory, and consequently the higher the chance of spoilage and obsolescence. Moreover,
maintaining higher quantities in inventory requires additional (possibly rented) warehouses with
correspondingly higher holding costs. In addition, buying and storing larger quantities require
greater amounts of capital that are usually borrowed at higher financing costs. Other logical
reasons for assuming variable holding costs are stated in the papers covered in this review.

Accurate calculation of the holding cost and careful attention to its variability are
essential from a practical point of view. The holding cost has huge implications on the optimum
inventory policy, and therefore on the overall profitability and performance of the given
organization. Clendenen and Rinks [3] emphasized the importance of using correct holding cost
values by analyzing the effect of holding costs in multi-plant supply chain networks. Using a
simulation study, they investigated the effect of varying holding costs on the planned and actual
inventories, and on the effectiveness of using a pull inventory-control strategy. Van Den Heuvel
and Wagelmans [4] analyzed the effect of the holding cost on the optimal solution for the
economic lot-sizing (ELS) problem. They showed that, in contrast to the classical EOQ model,
the setup cost and the holding cost are not equal in the optimal ELS solution.

This paper is organized into several sections. In Section 2, previous literature surveys are
summarized to show both the uniqueness and the need for this paper, and then the review
methodology and the classification scheme are introduced. In Section 3, the relevant inventory
models with time-dependent holding cost are reviewed and classified. In Section 4, inventory
models with stock-dependent holding cost are reviewed. In Section 5, inventory models with
other types of holding cost variability are reviewed. In Section 6, solution methods are discussed
and classified. In Section 7, conclusions and suggestions for future research are provided.

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2. Review methodology and classification

2.1. Approach and proposed classification

The literature on production-inventory models is quite extensive, and hence no single

literature survey paper can possibly cover the entire field. Andriolo et al. [5] provided the most
comprehensive and recent review of literature in this field. Bushuev et al. [6] reviewed and
discussed all literature review papers on inventory models that have been published over the past
ten decades. Lately, several researchers have started to develop various inventory models under
the assumption of variable parameters such as holding cost, purchasing cost, ordering cost, and
demand rate. Based on our survey of literature, and to the best of our knowledge, there are no
previous review papers that cover production-inventory models with variable holding costs.

The objective of this paper is to survey the production-inventory models with variable
holding costs published in the 1980-2018 period. This literature review is concerned with all
papers in which the holding cost varies either according to a specific function or a within a given
range. Our literature search resulted in identifying more than 150 relevant papers. Out of these,
we selected only papers in ISI or Scopus indexed journals. After applying this quality-based
selection criterion, we ended up with 90 papers. In Figure 1, the selected papers are classified
according to the year of publication. The overall growth in the number of publications per year
indicates an increasing interest in this area of research, especially during the past 10 years.

(Please insert Figure 1 about here)

In this paper, we mainly classify production-inventory models with variable holding cost
into three types based on the type of holding cost dependency as follows: (1) time-dependent
holding cost, (2) stock-dependent holding cost, and (3) multiple dependence or other holding
cost variability. We also investigate other distinguishing features of these models. Table 1
compares the properties of the reviewed inventory models based on nine features. The features
used for comparison are:

(1) Inventory model type: EOQ or EPQ.

(2) Holding cost variability: time-dependence, stock-dependence, or other dependence.
(3) Form of holding cost function: linear, nonlinear, step, or general.
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 (4) Holding cost equation: number of the holding cost equation shown in the text.
(5) Deterioration rate (if applicable): constant or variable.
(6) Shortages (if applicable): complete or partial backordering.
(7) Objective function: minimum cost, or maximum profit.
(8) Solution techniques.
(9) Applications.

(Please insert Table 1 about here)

2.2. Holding cost functions and properties

Various inventory models have been proposed with many forms of holding cost
variability, as a function of the storage time, item availability (stock level), or other relevant
parameters. These functions can be classified as either linear, nonlinear, discrete (step), or
general. The symbols used in describing the different holding cost functions are defined below.

h(·) Unit holding cost function

H(·) Total holding cost function
ai, hi, i Increasing constants such that: ai < ai+1, hi < hi+1, i < i+1
a, b, c Given constants
α(·), (·) General, positive, non-decreasing functions
q(t) Inventory level at time t
Q Order quantity
T Cycle time
D Demand rate per time unit
D̄ Average demand rate
P Production rate per time unit
C Unit purchasing cost
K Ordering cost per order
i Interest (inflation) rate
R Reorder level
S Shortage level
 Deterioration rate
TC Total cost
TP Total profit
p Proportion of defects
 Lagrange multiplier
t0 Time threshold before which the holding cost is constant

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 t1 Time threshold after which demand is constant
t2 Time at which the inventory level is zero
tp Production time duration.
tr Release time, time duration after production.
t The length of time in which the product has no deterioration.

3. Time-dependent holding cost

In several inventory models, the unit holding cost is assumed to be an increasing function
of storage time. In many realistic situations, this is due to the fact that the value of the stored
items can decrease as they stay longer in the inventory. Therefore, longer storage time is more
costly, because it requires more advanced technology in order to preserve the value of the stored
items. Lee and Dye [7], for example, considered the holding cost (preservation technology) as a
decision variable that affects the deterioration rate. By more investing more in storage equipment
and facilities, the retailer can slow down the deterioration of stored products.

3.1. Linear time-dependent holding cost

3.1.1. Holding cost equation (1)

Quite a few papers assume the holding cost to be a linearly increasing function of the
storage duration. The holding cost per unit is assumed to have a constant (fixed) part and a
variable (time-dependent) part, expressed as follows:

h(t) = a + bt (1)

By far, equation (1) is the most common function in the variable holding cost literature,
as it has been used in 30 papers (33% of surveyed papers). Pioneering work in this field was
done by Giri et al. [8] who constructed an EOQ model for deteriorating items with time-
dependent demand, assuming the holding cost to be an increasing linear function of time as in
(1). Shao et al. [9] developed a model to determine the quality target for a production process
with several markets. The unit holding cost is specified by (1), but the length of storage time is
assumed to be a normally distributed random variable. Shao et al. [10] extended the model of

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Shao et al. [9] by assuming that the storage duration, and consequently the holding cost, depend
on the quality characteristics of the product. In other words, the higher the quality of the product,
the shorter the expected storage time, and the lower the holding cost.

Balkhi and Tadj [11] investigated an inventory model for deteriorating items assuming
that the demand rate, deterioration rate, and ordering costs are all general functions of time. The
holding cost is assumed a linear function of storage duration. Roy [12] developed an inventory
model for deteriorating items with linear stock-dependent demand and linear time-dependent
holding cost. The items are assumed to deteriorate at a constant rate. Tripathy and Mishra [13]
constructed an inventory model for deteriorating items with price-dependent demand in which
the holding cost is a linear function of the storage duration. The model was developed assuming
a variable deterioration rate and complete backordering of shortages.

Mishra and Singh [14] considered both the demand rate and the holding cost to be time-
dependent in an inventory model for deteriorating items. The model was constructed assuming
that the holding cost is a linear function of storage time, the deterioration rate is constant, and
shortages are allowed and partially backlogged. Mishra et al. [15] relaxed the constant
deterioration rate assumption in the model of Mishra and Singh [14] and generalized it to the
case of a time-varying deterioration rate.

Guchhait et al. [16] developed EPQ-type models for deteriorating items in which both the
holding cost and the production rate are assumed to be linear functions of time. Three EPQ
models were formulated by assuming the demand to be: (1) a decreasing exponential function of
time, (2) an increasing linear function of the instantaneous stock-level, or (3) an increasing
function of time. Mishra [17] developed an inventory model for instantaneously deteriorating
items and time-dependent holding cost. Assuming that preservation technology is used to reduce
the deterioration rate during storage, the unit holding cost is an increasing linear function of
storage time. Making a similar assumption regarding the effect of preservation technology on the
deterioration rate, Mishra [18] developed an EOQ-type model for deteriorating items. The model
considers both the demand rate and the holding cost to be linearly time-dependent, and assumes
the backlogging rate to be a function of the waiting time.

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 Karmakar [19] developed an inventory model under the assumptions of linearly time-
varying holding cost, stochastic consumption rate, and partial backlogging of unsatisfied
demand. Palanivel and Uthayakumar [20] examined an EPQ model under the effect of inflation
and the time value of money, assuming the holding cost to follow an increasing linear function of
storage time.

Choudhury et al. [21] developed an inventory model for deteriorating items in which the
demand is stochastic and the holding cost is a linear increasing function of the time spent in
storage. The model is built assuming a variable deterioration rate and complete backlogging of
shortages. Rangarajan and Karthikeyan [22] proposed inventory models for constantly
deteriorating items, assuming a linear time-dependent carrying cost and both linear and quadratic
time-dependent demand rates. Dutta and Kumar [23] developed an inventory model for
perishable items under the following assumptions: linear time-dependent holding cost, partial
backlogging of unsatisfied demand, time-varying demand, and constant deterioration rate. Tayal
et al. [24] considered an EPQ model for deteriorating items assuming that the holding cost is
time-dependent, the demand rate is stochastic, the production rate is a function of the demand
rate, and shortages are not allowed.

Alfares and Ghaithan [25] developed an EOQ-type inventory model based on the
assumption that the holding cost is an increasing linear function of the storage time. The model is
constructed assuming that the demand rate is price-dependent and the purchase cost is order-size-
dependent subject to all-units quantity discounts. Giri and Bardhan [26] investigated an
integrated inventory model for a single manufacturer, a single retailer supply chain, in which the
end customer demand depends on the retailer’s price and the on-hand inventory level. The
manufacturer’s production rate is time-dependent and the retailer’s holding cost is assumed to be
an increasing linear function of the storage duration.

Sivashankari [27] constructed three production-inventory models for deteriorating items

assuming constant, linear, and quadratic time-dependent holding costs. A systematic analysis is
performed to compare the three models in terms of the total cost and the optimal production
quantity. Pervin et al. [28] considered an inventory model with a stochastic deterioration rate, a
time-dependent demand, and a time-dependent holding cost as defined by (1). An optimal

8
solution algorithm is used to minimize the total cost of ordering, holding, shortage, deterioration,
lost sales, and purchasing. Pervin et al. [29] developed a similar model, but they assumed that the
demand is stock-dependent. In addition, a trade credit policy is used and a price discount is
offered during shortages to encourage customers to backorder, i.e. to wait for late deliveries.
Patel and Sheikh [30] considered an inventory model for two storage sites: an owned warehouse
(OW), and a rented warehouse (RW) with a higher holding cost and a lower deterioration rate.
Both the demand rate and the holding costs are linear functions of time.

Rajeswari et al. [31] developed a fuzzy inventory model for deteriorating items, with
partial backlogging and time-dependent holding cost, demand, and deterioration. The holding
cost is linearly time-dependent as in (1), but all of the cost components are trapezoidal fuzzy
numbers. Chandra [32] considered an inventory model for seasonal products, allowing for partial
backordering of shortages. The holding cost is an increasing linear function of storage time and
the demand rate is a ramp-type function of time. The model utilizes the idea of offering a price
discount for customers who are willing to backorder their demands. Rastogi et al. [33] developed
an inventory model for deteriorating items considering permissible delays in payment and a cash
discount for the retailer to pay the dues. The demand rate is price-dependent and the holding cost
is an increasing linear function of storage time.

Pervin et al. [34] considered an integrated vendor-buyer inventory model for deteriorating
items in which the holding cost depends on the storage time and the demand rate depends on the
stock level. The model allows delayed payments for buyers and partial backordering of
shortages. Karuppasamy & Uthayakumar [35] developed a model for pharmaceutical inventory
in which the holding cost and the demand rate are both functions of storage time. The model is
developed assuming the deterioration rate is variable and shortages are not allowed. Sen and
Saha [36] developed an EOQ model for deteriorating items allowing shortages and permissible
payment delays. The holding cost varies linearly with time, while the demand rate varies non-
linearly. Sharma et al. [37] developed an EOQ inventory model for deteriorating items assuming
the holding cost varies linearly with storage time. The demand rate depends on the selling price
and expiry date, and shortages are partially backordered.

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3.1.2. Holding cost equation (2)

A number of papers assume the holding cost to follow a linear time function without the
constant term, which has the form:

h(t) = bt (2)

Equation (2) is a special case of equation (1), in which the constant term (a) is assumed to
be zero. Tripathi [38] formulated an EPQ-type model in which both the holding cost and the
demand rate are linear functions of time. Dutta and Kumar [39] developed two inventory models
for deteriorating items with partial backlogging of shortages. Both models, one crisp and one
fuzzy, assume that the holding cost and the demand rate are time dependent. The first model, in
which the cost parameters are all crisp (deterministic) and the holding cost is defined by (2), is
solved by Taylor’s series expansion. Tripathi and Mishra [40] presented an EOQ-type model
with linearly time dependent demand and two cases of time-dependent holding cost. In the first
case, the holding cost is a linear function of the storage time, as given by (2).

3.1.3. Holding cost equation (3)

Shah et al. [41] investigated a variable-demand inventory model for non-instantaneous

deteriorating items, assuming linear time-varying holding cost and deterioration rate. The
holding cost is constant while the product has no deterioration, but it becomes linearly time-
dependent as soon as deterioration starts at time t. The demand rate is assumed to be a function
of both the advertisement level and the selling price of an item. The unit holding cost is specified
by the following function:

a, if t≤t θ
h(t )=
{
a+b (t−t θ ),if t≥t θ
(3)

Equation (3) is a generalized form of both equations (1) and (2). Equation (1) is obtained
from (3) by setting t = 0, while (2) is obtained by setting both a = 0 and t = 0. Rabbani et al.
[42] presented an integrated inventory and advertising model for non-instantaneously
deteriorating items with time-dependent holding cost. While the product is still fresh, i.e. has not

10
started to deteriorate, it is sold at a constant initial price. After deterioration starts, the price is
exponentially discounted with time. Demand is a function of both the price and the
advertisement frequency. The holding cost is an increasing function of time, representing the
rising preservation costs of deteriorating items. In the model, the holding cost is assumed a
general time-dependent function. However, in the numerical examples, the holding cost is
specified by equation (3).

3.2. Nonlinear time-dependent holding cost

3.2.1. Holding cost equation (4)

Several authors assumed the holding cost to be a continuous nonlinear function of the
storage time. Weiss [43] developed an inventory model for both deterministic and stochastic
demands. He assumed the unit holding cost to be non-linearly dependent on storage time
duration according to the following function:

h(t) = btc (4)

Goh [44] constructed two deterministic, infinite horizon, inventory models for a single
item, in which the demand rate is a function of the current inventory level. Both time-dependent
and stock-dependent holding cost were considered in these two models. In the first model, the
holding cost is a polynomial function of the storage duration, which is given by (4). Giri and
Chaudhuri [45] extended the models of Goh [44] for nonlinear stock-dependent and time-
dependent holding costs to include the case of deteriorating items. Two models were formulated,
assuming either time-dependent holding costs or stock-dependent holding costs.

Using the same assumptions on holding cost, Chang [46] extended the work of Giri and
Chaudhuri [45] by maximizing the profit instead of minimizing the cost and allowing non-zero
end inventory. Chang [46] developed two inventory models. In the first model, the holding cost
is a nonlinear function of time. In the second model, the holding cost is a nonlinear function of
the inventory level. Ferguson et al. [47] extended the work of Weiss [43] by including delivery
surcharges for infrequent orders and price discounts for perishable items.

11
 Mahata and Goswami [48] examined an inventory model for deteriorating items
assuming the holding cost to be a nonlinear function of the storage time. The demand is assumed
to change exponentially with the stock level, and items are assumed to deteriorate according to a
fuzzy deterioration rate. Pando et al. [49] investigated an inventory model in which both the
holding cost and the demand rate are power functions of the storage time. The objective is to
maximize profit, assuming a constant unit purchase cost (no discounts) and no shortages. San-
José et al. [50] considered an EPQ inventory model in which the demand rate depends on the
item price, the holding cost varies nonlinearly with the storage time, and shortages are partially
backlogged. Tripathi [51] constructed an EOQ inventory model with nonlinear time-dependent
holding cost and demand rate.

3.2.2. Holding cost equation (5)

San-José et al. [52] extended the work of Weiss [43] by studying an EOQ model with
partial backordering and time-varying holding cost. The holding cost function below has two
components, a fixed cost, and a variable cost that increases nonlinearly with the storage time.

h(t) = a + btc (5)

Equation (4) is a special case of (5) that is obtained by setting the fixed cost part (a) to
zero. Assuming holding cost function (5), Khalilpourazari and Pasandideh [53] proposed a multi-
item inventory model in which the holding cost is dependent on the storage time and unsatisfied
demands are partially backordered. The model is constrained by budget availability, warehouse
capacity, total permissible holding cost, and total permissible backordering cost.

3.2.3. Holding cost equation (6)

Tripathi and Singh [54] presented stock-dependent demand models considering three
cases of holding cost assumptions. The first case assumes a constant holding cost. The third case,
which assumes linear stock-dependent holding cost, will be discussed in section 4.1. The second
case assumes an exponential time-dependent holding cost, which is given by equation (6). Rajan
and Uthayakumar [55] developed an EOQ model assuming the demand rate is a function of the
promotional effort of the sales team and the holding cost is an exponential function of storage
time. Yadav and Swami [56] presented an EPQ inventory model for deteriorating items assuming

12
a time-dependent demand rate and partially backlogged shortages. The holding cost is assumed
to exponentially increase with storage time as described below:

h(t) = aebt (6)

3.2.4. Holding cost equation (7)

Valliathal and Uthayakumar [57] developed EPQ models for deteriorating items
assuming a non-linear time-dependent holding cost. Two models are analyzed, by considering
both stock-dependent and time-dependent demand rates. The deterioration rate is assumed to be a
function of time, shortages are allowed and are partially backlogged, and the objective is to
minimize the total cost. The holding cost has nonlinear time dependence according to the
quadratic function (7). Sivashankari [27] developed three EPQ models assuming that the holding
cost is either constant, a linear function of time, or a quadratic function of time. The quadratic
holding cost function is specified by the following equation:

h(t) = a + bt + ct2 (7)

3.2.5. Holding cost equation (8)

Tripathi and Mishra [40] analyzed an inventory system with a time-dependent demand
rate and two time-varying holding cost models. Both models are solved by differential calculus
to determine the optimal order size and the optimal cycle time. The first model, which has a
linearly time-dependent holding cost, has been presented in section 3.1. In the second model, the
unit holding cost has a quadratic time dependence specified by equation (8). Equation (8) can be
considered as a special case of equations (4), (5) and (7), and it has the following form:

h(t) = bt2 (8)

3.3. Discrete (step) time-dependent holding cost

3.3.1. Holding cost equation (9)

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 In several papers, the holding cost is assumed to be a discrete (step) function of time.
This assumption was made by Alfares [58] who proposed an EOQ model in which the unit
holding cost is a step function that increases either retroactively or incrementally with storage
time. Assuming h1 < h2 < …< hn, the unit holding cost increases discretely with storage time
according to the following equation:

h(t )=hi , if ti−1 <t≤ti , i=1,...,n (9)

Where t0 = 0, tn = 

Urban [59] modified the work of Alfares [58] by allowing non-zero end inventory and
changing the objective from minimizing the cost to maximizing the profit. Alfares [60]
developed an EPQ model assuming the demand rate to be constant and the holding cost is a
discretely increasing function of the storage duration. Sazvar et al. [61] developed a time-
dependent, step holding cost inventory model for deteriorating items, assuming stochastic
demands, stochastic lead times, and complete backlogging of unsatisfied demands. Gupta and
Singh [62] developed an EPQ model assuming a retroactive holding cost for two echelons, a
vendor and a buyer. The model is constructed under the assumption of variable deterioration
rates, a variable inflation rate, a variable production rate, and a fuzzy demand rate.

Alfares [63] developed an EPQ model assuming demand to be stock-dependent and that
the holding cost is a step function of the time spent in stock. Later, Alfares [64] extended his [63]
model by considering a variable unit purchase cost based on all-units quantity discounts and by
pursuing a maximum-profit objective. Alfares [65] developed an EPQ-type inventory model
considering a time-varying holding cost, a constant demand, quantity discounts, and no
shortages. Tyagi [66] considered a model in which the unit holding cost increases as a step
function of time.

3.4. General time-dependent holding cost

3.4.1. Holding cost equation (10)

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 A number of inventory models have been proposed assuming the holding cost to be a
general function of storage time. Assuming that α(t) is a general, non-decreasing function of
storage time; the holding cost can be expressed as follows:

h(t) = α(t) (10)

Adida and Perakis [67] constructed an EPQ inventory model with stochastic price-
dependent demand, assuming the holding cost to be a general function of the storage time.
Federgruen and Wan [68] developed a continuous-review model under the assumptions of a
time-dependent holding cost, delay-dependent backlogging cost, and the full backlogging of
stock outs. Federgruen and Wan [69] developed a periodic-review model assuming a general
time-dependent holding cost, delay-dependent backlogging cost, and either the full or partial
backlogging of shortages. Rabbani et al. [42] considered a general time-increasing holding cost
for deteriorating items, to reflect the increasing preservation costs with longer storage times.
O'Neill and Sanni [70] developed a generalized EOQ inventory model in which the holding cost
is proportional to the total item-holding-time in inventory. The model maximizes the total profit,
assuming demand is price-dependent, price is time-dependent, and deterioration rate is variable.

4. Stock-dependent holding cost

Many inventory models assume the holding cost to be a function of the inventory level or
monetary value. This is assumption is due to several real-life factors that make larger stock
disproportionally more expensive to store. For example, additional storage space must be
obtained by adding (possibly renting) extra storage facilities at a higher cost. Moreover, larger
inventory imposes the need to invest greater amounts of capital at higher financing costs.

4.1. Linear stock-dependent holding cost

4.1.1. Holding cost equation (11)

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 In several studies, the unit holding cost is assumed to be an increasing linear function of
the inventory level, which is given by:

h(q) = bq (11)

Muhlemann and Valtis-Spanopoulos [71] formulated an EOQ-type inventory model

assuming a linearly increasing stock-dependent holding cost according to (11). This assumption
is based on the fact that larger investments in inventory require successively higher financing
costs.

4.1.2. Holding cost equation (12)

Tripathi & Singh [54] developed an inventory model where the demand rate is stock level
dependent and the holding cost is linearly dependent on the stock level. The mathematical model
is solved by numerical methods to find the optimal order quantity and cycle time. Adding a
constant term (a) to equation (11), the holding cost per unit is a linear function that is specified
by:

h(q) = a + bq (12)

4.2. Nonlinear stock-dependent holding cost

4.2.1. Holding cost equation (13)

The nonlinear time-dependent holding cost models of Goh [44], Giri and Chaudhuri [45],
Chang [46], Mahata and Goswami [48], and Tripathi [51] have been described in section 3.2.
These papers also considered nonlinear stock-dependent holding costs defined as follows:

h(q) = bqc (13)

Equation (11) is a special case of (13) in which the value of the exponent c is equal to 1.
Abou-El-Ata and Kotb [72] analyzed a multi-item EOQ inventory model in which the holding
cost is specified by (13) and limits are imposed on both the number of orders per year and the
total holding cost per year. Geometric programing is used to derive the optimal order quantity

16
that minimizes the total cost. Berman and Perry [73] formulated an inventory model in which the
holding cost function is assumed to be an exponential function of item availability as defined by
(13). Backorders are not allowed, and the demand is a polynomial function of the instantaneous
stock level. Scarpello and Ritelli [74] developed an algorithm to solve an inventory model for
deteriorating items with stock-dependent holding costs, where the inventory holding cost is a
power function of the stock level.

Gayen and Pal [75] developed an inventory model assuming the holding cost to be an
increasing nonlinear function of the on-hand inventory. The nonlinear holding cost assumption is
based on considering the case of a dual storage facility, consisting of an owned warehouse and a
rented warehouse. Pando et al. [76] constructed a similar EOQ inventory model with a nonlinear
stock-dependent holding cost and a nonlinear stock-dependent demand rate, using numerical
algorithms to obtain the optimal solution. Yang [77] developed an EOQ model assuming stock-
level dependency of both the demand rate and the holding cost. Allowing for partial backlogging
of unsatisfied demands, the model determines the order quantity and the end inventory level to
maximize the total profit.

4.2.2. Holding cost equation (14)

Das et al. [78] developed an EOQ-type multi-item inventory model assuming that the unit
holding cost is an increasing nonlinear function of the stock quantity. Other assumptions include
limited storage space and full backlogging of shortages. The unit holding cost function shown
below considers the shortage level in determining the average stock quantity:

b
Q−S
h(Q )=a ( )
2 (14)

4.3. General stock-dependent holding cost

4.3.1. Holding cost equation (15)

17
 Frenk et al. [79] formulated an EOQ model, assuming variable ordering, holding, and
backlogging costs. The total holding cost, shown below, is assumed to be a sum of two parts.
The first term is the out-of-pocket holding cost, which is a general function of the stock level.
The second term is the opportunity cost that is calculated by multiplying the value of the
inventory with an opportunity cost (interest) rate parameter.

H(q) = α(q) + iCq/Q (15)

5. Multiple and other holding cost dependence

This section presents inventory models with other types of holding cost variability,
including holding cost dependence on multiple factors.

5.1 Linear holding cost

5.1.1. Holding cost equation (16)

Gupta et al. [80] formulated an inventory model where holding costs are lead time-
dependent and interval valued, i.e. they are uncertain but vary within two known limits. Model
assumptions include constant lead-time, uniform demand, partial backlogging, and discounts for
advanced payments. Dutta and Kumar [39] presented a fuzzy inventory model with item
deterioration, partial backlogging, and time-dependent holding cost. All cost parameters,
including the holding cost, are interval valued. The model is transformed into a multi-objective
non-linear optimization problem, which is solved by an interval arithmetic procedure. Bhunia et
al. [81] formulated an EPQ model assuming demand depends on both the selling price and the
marketing investment and all cost components are interval valued. The unit holding cost is not
precisely specified, but known to lie in a range between two given values, as specified below:

h  [h1, h2] (16)

5.1.2. Holding cost equation (17)

18
 Wahab and Jaber [82] developed an EOQ model for perfect and imperfect quality items.
The demand is assumed to be constant and known, and the effect of learning on the lot sizes and
the total cost is taken into consideration. The holding cost depends linearly on the item’s quality,
and therefore the holding cost of good items (h2) is greater than the holding cost of defective
items (h1) as expressed below:

h 1 , if item is defective
h=
{h2 , if item is good
(17)

5.2 Non-Linear holding cost

5.2.1. Holding cost equation (18)

Pando et al. [83] extended the works of Pando et al., [49] and [76], to include the case
where the holding cost varies nonlinearly with both the storage time and the inventory level.
Pando et al. [83] constructed an EOQ-type model where shortages are not allowed, the demand
depends on the stock-level, and the holding cost depends on both the storage time and the stock-
level. The demand rate is assumed a concave function of the stock level, while the holding cost is
a power function of both the time and the quantity, which is described by the following equation:

h(t, q) = qabtc (18)

Equation (18) is obtained by multiplying the time-dependent holding cost part of equation
(4) by a stock-dependent cost part.

5.2.2. Holding cost equation (19)

Hsu [84] presented an inventory lot-sizing model for deteriorating items, assuming both
the deterioration rate and the holding cost to depend on the length of storage time. Assuming
general concave production and inventory cost functions, dynamic programming is used to find
the optimal solution. The holding cost function is expressed as follows:

H(t, q) = α(t) + (t)q(t) (19)

19
 Hsu and Lowe [85] extended Hsu’s [84] work by including the backordering cost,
excluding deterioration, and considering both the holding and backorder costs to be period-pair-
dependent. This means that the costs of inventory (or backordered) units in any period depend on
both the period in which they are produced and the period in which they are consumed. Hsu [86]
generalized the work of Hsu [84] by developing a lot-sizing model for perishable products with
backorders and single-period time-dependent costs. While Hsu and Lowe [85] assume that the
holding and backordering costs are defined for every pair of periods, Hsu [86] assumes these
costs to change from one period to another.

5.2.3. Holding cost equation (20)

Pal et al. [87] considered a single-period news vendor model in which the holding cost is
a nonlinear function of the stock level. The model considers distribution-free stochastic demand,
and allows shortages to be partially backlogged. Products whose quality is lower than a given
threshold are rejected by customers, while excess products are sold at a salvage value that is less
than the cost. This model assumes that the inventory level at which the customer stops buying
depends on the holding cost. On the other hand, the holding cost depends on the order quantity as
shown below.

−Q /D
Qe
h(Q )=a+
√ 2bπ (20)

5.2.4. Holding cost equation (21)

Tyagi [88] developed an inventory model in which shortages are partially backlogged and
the holding cost is a decreasing nonlinear function of the depletion (demand) rate. At the start of
the cycle, the demand rate D(t) is a power function of the inventory level. After the inventory
level drops to a certain stock level q0, at time t1, the demand rate becomes constant. As expressed
below, the holding cost also varies with the demand rate up to time t1, and then it becomes
constant until the end of the cycle.

20
 b
h(t )=
{
a+

a,
D(t )
,t ∈[ 0 , t1 ]

t ∈[ t 1 ,t 2 ]

(21)

5.2.5. Holding cost equation (22)

Tyagi et al. [89] considered the unit holding cost to be a nonlinear function of both the
time t and the deterioration rate (t), which is expressed by (22). Equation (22) can be considered
as a generalized form of equation (6), which is obtained by adding a constant part and a time-
dependent deterioration rate. The deterioration rate is assumed to follow a Weibull distribution
and shortages are partially backlogged.

h(t) = a + bet(t) (22)

5.2.6. Holding cost equation (23)

Several papers assume the unit holding cost to be a general, non-decreasing function of
both the storage time and the inventory level as defined by (23). Shaw and Wagelmans [90]
developed an economic lot size model assuming that the production cost functions are piecewise
linear (consisting of a fixed set-up cost plus a linear variable cost). The model considers the
backlogging and start-up costs and allows general holding cost functions. Since the formulated
problem is NP-hard, a specialized heuristic algorithm was developed to solve it efficiently in a
reasonable computational time. Chu et al. [91] considered an economic lot-sizing problem for
both deteriorating and non-deteriorating items, in which the deterioration rate and the
generalized stock-dependent holding cost depend on the length of storage time.

h(t, q) = α(t, q) (23)

Smith and Zhang [92] analyzed an infinite-horizon production-inventory system with

time-varying convex inventory holding costs. To minimize forecast costs and errors, the

21
objective is to minimize the forecasting horizon in order to optimize current production
decisions. An algorithm is developed to find this minimum horizon, which corresponds to the
longest time interval during which it is profitable to keep inventory. Ghate and Smith [93]
considered a similar problem but allowed backlogging and treated it as negative inventory.

5.2.7. Holding cost equation (24)

Maity et al. [94] presented an inventory model in which demand is price-dependent,

shortages are not allowed, and both the selling price and the production rate are stock-dependent.
The holding cost is fuzzy and depends on the quality of the stored items, which are classified into
two types: fresh and returned. The holding cost of a returned product is less than that for a fresh
product, and both costs are fuzzy variables represented by triangular fuzzy numbers, as
expressed below:

(a1 , a2 ,a 3 ), if item is returned

h=
{
(h1 , h2 , h3 ), if item is fresh
,
hi > ai, i = 1, 2, 3
(24)

5.2.8. Holding cost equation (25)

Teunter [95] considered the unit holding cost to consist of two components: an out-of-
pocket cost rate a and an opportunity cost rate i(C) as specified by (25). A Reverse Logistics
Valuation Method (RLVM) is used to determine cost functions (C) and hence the different
holding cost rates of new, returned, and recycled items.

h(C) = a + i(C) (25)

Akçali and Bayindir [96] also discussed inventory holding costs in a reverse logistics
environment. In a vehicle salvaging facility, scrap cars are disassembled to recover valuable
components (e.g. engines) from end-of-life products (e.g. body or hulk) that have different
holding costs. Six alternative functions (C) can be used in the holding cost equation (25). A
simulation study is used to compare the six functions with respect to five performance measures.
Bouras [97] presents a reverse logistics model with three separate stocks for new,
22
remanufactured, and returned items. The model is not based on Equation (25). However, for each
stock type, there is a different cost for the inventory level to deviate from a preset target.
Assuming item deterioration, advertisement-dependent demand, and a continuous-review policy,
an optimal control model is used to minimize the total cost.

6. Solution methods

Many solution techniques have been used for inventory models involving variable
holding costs. As shown in Table 1, these techniques can be classified into four main types:
optimum exact formulas (OEF), optimum exact algorithms (OEA), numerical approximate
algorithms (NAA), and heuristic approximate algorithms (HAA).

6.1. Optimum exact formulas (OEF)

This category of the solution approaches refers to the straightforward use of differential
calculus. By utilizing necessary and sufficient conditions on the total cost or profit objective
functions, closed-form formulas are developed to obtain the optimal/exact values of the decision
variables. A majority of the inventory models with variable holding costs (33% of the reviewed
papers) utilized this approach. For example, Weiss [43] used differential calculus to find the
optimum order quantity and the optimum number of replenishments.

As another example of this approach, Ferguson et al. [47] developed a model for a
product with constant demand, fixed ordering cost, and nonlinear time-dependent holding cost.
First, the total cost function is constructed and shown to be convex. Using the first-order
condition (first derivative = 0), the equation is solved to obtain a closed-form expression for the
optimum value of the order quantity.

6.2. Optimum exact algorithms (OEA)

This approach refers to developing specific procedures and algorithms to find the optimal
solution for the given production-inventory model. Using the properties of the model, custom-

23
made algorithms are developed to produce optimum and exact solutions. This approach was used
in 20% of the reviewed papers. For example, Alfares [58], who used it to solve an EOQ-type
model where the demand is a power function of the current stock level, and the holding cost is a
discrete (step) function of the storage duration. Assuming a retroactive holding cost increase, and
aiming to minimize the total cost, a four-step algorithm is used to obtain the optimal solution.

Pando et al. [76] considered an EQO-type inventory model with a non-linear holding cost
and a stock-dependent demand rate. After proving the existence and uniqueness of the optimal
policy, specific procedures were developed to determine the optimal solution. Shah et al. [41]
formulated an inventory model for deteriorating items with a price- and advertising-dependent
demand and a time-dependent holding cost. An exact algorithm was used to find the optimal
inventory and marketing policy.

6.3. Numerical approximate algorithms (NAA)

This type of solution techniques includes iterative solution approaches that provide
numerical (approximate) optimal solutions such as the Newton-Raphson method, Newton -
Fourier method, the Taylor series expansions, and various nonlinear-programming solution
methods. Such approximate numerical methods are used in 23% of the models reviewed in this
paper. For example, Muhlemann & Valtis-Spanopoulos [71] utilized the Newton-Raphson
method to determine the ordering quantity. Shao et al. [9] also utilized the Newton-Raphson
method to find the cycle times and selling prices.

Giri et al. [8] numerically solved an inventory model in which the demand rate,
deterioration rate, holding cost, and ordering cost are time-dependent. To minimize the total cost,
quadrature formulas were used to approximate the integrals, and one-dimensional search
techniques were used to estimate the decision variables. Tripathi and Singh [54] developed
mathematical models for inventory systems with stock-dependent demand and three holding cost
alternatives: constant, time-dependent, and stock-dependent. These models were solved
numerically, using a truncated version of Taylor's series expansions of the exponential terms.

24
 Guchhait et al. [16] used a numerical approach to solve a production-inventory model
with an imperfect production process, deteriorating items, a variable production rate, and a time-
dependent holding cost. Three different demand functions were considered that are either time-
dependent or stock-dependent. Both the production rate and the proportion of defects are
considered to be decision variables. The objective is to maximize total profit over a finite
planning horizon under the effect of inflation. For each demand function, the solution is obtained
numerically in five steps using the Euler–Lagrange function and the Newton–Raphson method.

6.4. Heuristic approximate algorithms (HAA)

Heuristic solution approaches are utilized when finding an optimal solution is impossible
or impractical. HAA approached are suitable for solving large optimization problems that require
extended computation times and efforts. As shown in Table 1, few papers utilized heuristic
techniques out of the papers covered in this survey. For example, Chu et al. [91] developed an
EOQ-type model where both the deterioration rate and the inventory holding cost depend on the
storage time. A polynomial-time heuristic, known as the best Consecutive-Cover-Ordering
(CCO) policy, is used to solve the problem. Gupta et al. [80] formulated an inventory problem
with an interval-based holding cost as a mixed integer constrained optimization model with
interval coefficients. The model is solved by a specialized real-coded genetic algorithm (RCGA)
with ranking selection.

Teunter [95] and Akçali and Bayindir [96] utilized a stochastic heuristic search method to
evaluate alternative holding cost functions and inventory policies in reverse logistics settings.
Adida and Perakis [67] applied a heuristic search technique to a multi-product production-
inventory model with price-dependent demand and a linear holding cost, in which the production
cost is an increasing nonlinear function of the production rate. The problem is formulated based
on optimal control theory and nonlinear programming techniques, expressing the optimal policy
as a function of the Lagrange multiplier. A heuristic search based on iterative trial and error is
then used to determine the value of the multiplier.

7. Applications, trends, and suggestions

25
 This literature review has shown that EOQ and EPQ production-inventory models with
variable holding costs is an increasingly active area of research. After reviewing 90 relevant
papers, the applications and features of published research are identified, and suggestions for
future research are made.

7.1. Applications

The practical applications of the reviewed papers are indicated in Table 1, and the great
majority of these papers validated their models through numerical examples rather than applied
case studies. Some of the real-life applications include: food processing, milk industry, vehicle
salvaging, steel galvanization, and pharmaceutical goods. In order for practitioners and
industrials to properly select the suitable holding cost expression for their real-life case, model
assumptions should be considered and verified based on the actual data and practical concerns of
their company. In addition, the values of all relevant parameters must be estimated and checked
for accuracy. Based on the selected model and input data, a solution technique should be
employed to obtain the best results. Finally, the results obtained should be carefully
implemented, and the whole situation must be monitored for possible changes and adjustments.

The 25 equations presented in this survey consider the holding cost to be dependent on
several factors such as storage time, inventory level, item quality, deterioration rate, and lead
time. Possibly all of these factors affect the holding cost to varying degrees. However, in most
situations usually one (or possibly a small subset) of these factors has a dominating influence on
the holding cost to the extent that the other factors can be safely ignored. For each practical
application, the assumptions associated with different holding cost equations should be
examined, and only the equation whose assumptions are valid for the given case should be used.
Moreover, an empirical study should be performed for each inventory situation to determine
applicable cost components, and the form and magnitude of their contributions to the holding
cost.

Without empirical cost studies, simple guidelines can be used for selecting appropriate
holding cost equations for practical applications. Time-dependent holding cost equations should
be used when the time aspect is the most important factor affecting holding cost variability. This

26
is the case for items that require more expensive warehousing facilities for longer-term storage.
Similarly, stock-dependent holding cost equations are to be used when the inventory level has
the maximum impact on the holding cost. This is the case when higher inventory levels
necessitate additional warehouses to rent or extra funds to borrow. Other holding cost factors
such as lead-time and item quality should be considered only if these factors are applicable and
highly influential. Finally, equations with multiple factors should be used when several factors
have significant impacts on the holding cost variability.

Literature on the applications of EOQ/EPQ inventory models with variable holding cost
is very scarce, and has not caught up with the fast growth of theoretical work in this area. This
makes the consideration of such applications a promising area with many opportunities for future
research. Therefore, analysis of holding cost applications and equations using empirical real-life
data is a primary suggestion for future work, which will be presented in detail in section 7.3.

7.2. Past features and future trends

Several common features of the published works have been identified from this survey.
First, the interest in this field of research is high and it has significantly grown over the last 10
years. This indicates that this field is becoming an established area of research within the
inventory control community. Second, the fast growth in theoretical research has not been
matched by sufficient growth in practical real-life applications. This is evident from the small
percentage (7%) of production-inventory papers that use real data or present actual case studies.
Third, there has been a continuing growth in the variety and sophistication of the holding cost
functions. Originally, most models were based on simple linear functions representing holding
cost dependence on time only. Over the years, various nonlinear and general functions have been
proposed to represent holding cost dependence on either one or several other factors, such as the
stock level, demand rate, and deterioration rate.

Most of the papers with a variable holding cost (78%) presented EOQ-based inventory
models, while a smaller number of them (22%) presented EPQ-based models. Most of these
models (81%) assumed the holding cost to be a function of the storage time duration, while a
smaller number of models (29%) considered it to be a function of the stock level. From the time-

27
dependent holding cost models, the linear functional form is the most common assumption
(49%). The most popular solution technique is to use direct differential calculus to derive
formulas for the optimum solution. Minimizing the total cost is the dominant objective, which is
pursued by two-thirds of the selected papers. In addition, all the reviewed papers presented
single-objective models, so far ignoring all multi-objective approaches. Finally, the great
majority of reviewed papers (93%) validated their models through numerical examples rather
than applied case studies.

Based on the main trends observed in the literature, several future developments are
expected to emerge in this area of research. First, because of the increasing sophistication of the
holding cost functions, the models will continue to become more complex and difficult to solve.
Second, as a consequence, more powerful solution methods will be used and developed. This is
expected to lead to a more frequent use of heuristics in general and of meta-heuristics in
particular. Third, as the models become more representative and the solution methods become
more powerful, researchers will be able to tackle larger-size practical problems. This is expected
to result in more real-life applications and case studies. Finally, in line with the general trend in
the field of inventory control, more inventory models with variable holding cost will address
supply chain aspects, aiming to optimize the overall multi-echelon supply chain systems.

7.3. Suggestions for future work

This literature review has been used to recognize research trends and analyze gaps in the
published literature. Consequently, future research directions and suggestions for further research
in production-inventory models with variable holding costs are summarized below.

 Using empirical data to validate and compare the different equations (1)-(25), which have
been used to express holding cost variability and dependence. Empirical data can also be
used to propose new equations that accurately represent the practical characteristics of the
holding cost variability and dependence.

 Combining holding cost variability with the variability of other model parameters, such
as demand and other cost components (costs of purchasing, ordering, backordering,
28
 deterioration, defects, etc.). For example, Alamri [98] assumed the production,
remanufacturing, demand, return, and deterioration rates are general functions of time.

 Introducing stochastics aspects of various model parameters such as demand, costs, and
quality, and addressing the effect of uncertainty on these parameters. For example,
Moarefdoost et al. [99] developed an inventory model assuming Poisson distribution of
demand.

 Considering multiple objectives and multi-criteria decision making, by including non-

financial performance measures such as flexibility, quality, and customer satisfaction.

 Expanding the models developed for single-item, single-supplier, and single-storage

contexts, to consider multiple items, multiple suppliers, and multiple storage locations.

 Considering multi-echelon supply chain environments, consisting of suppliers,

manufacturers, and retailers. In this case, the holding cost variability can be dependent on
the inventory type (raw materials, WIP, and finished-goods).

 Introducing additional practical aspects into model formulation, such as lead-time,

reliability, maintenance, defects, and inspection errors.

 Adding various practical constraints on time, space, budget, capacity and other resources,
which are typical limitations in real-life production-inventory control situations.

 Integrating production-inventory models with variable holding costs with other relevant
problems such as production scheduling and facility location. For example, Firoozi et al.
[100] integrated inventory control and facility location decisions.

 Extending EOQ-based models, assuming instantaneous order arrival, to EPQ-based

models that assume gradual order arrival according to a finite production rate. This is a
big opportunity for future research, since 78% of the published models are EOQ-based.

 Developing new algorithms to effectively and efficiently solve the relevant production-
inventory models. In particular, heuristic methods have not been used extensively for
these models, and hence they represent a promising area for future research.

29
  Applying production-inventory models with variable holding costs to real-life case
studies. This is needed to prove the practical value of these models and to validate their
assumptions, as most previous studies only used small numerical examples.

16

14

12

10
Number of articles

0
80 94 97 00 03 05 07 09 11 13 15 17
19 19 19 20 20 20 20 20 20 20 20 20

Year of publication

Figure 1: The distribution of the selected papers over the year of publication.

30
 Table 1: Summary of the features of reviewed papers

Application

Equation
Inventory Holding Cost Holding Cost Objective Solution
Deter Shor
Type Dependency Function Type Function Techniques
Reference

-linearNon

General
Linear
Stock

Other

Profit

NAA

HAA
Time
EOQ

OEA

Com
EPQ

OEF
Cost
Step

Con

Var

Par
Abou-El-Ata & Kotb
     NE 13
(1997)
Adida & Perakis (2007)      NE 10
Akçali and Bayindir
      VS 25
(2008)
Alfares & Ghaithan
     NE 1
(2016)
Alfares (2007)      NE 9
Alfares (2012)      FP 9
Alfares (2014)      NE 9
Alfares (2015a)      NE 9
Alfares (2015b)      FP 9
Balkhi & Tadj (2008)        NE 1
Berman & Perry (2006)      NE 13
Bhunia et al. (2017)       NE 16
Chandra (2017)       NE 1
4,
Chang (2004)        NE
13
Choudhury et al. (2015)        NE 1
Chu et al. (2005)       NE 23
Das et al. (2000)        NE 14
Dutta & Kumar (2015a)        NE 1
2,
Dutta & Kumar (2015b)        NE
16
Federgruen & Wang
    NE 10
(2015a)
Federgruen & Wang
       NE 10
(2015b)
Ferguson et al. (2007)       MI 4
Frenk et al. (2014)      NE 15
Gayen & Pal (2009)       NE 13
Ghate & Smith (2009)       NE 23
Giri & Bardhan (2016)       NE 1
Giri & Chaudhuri 4,
       NE
(1998) 13
Giri et al. (1996)        NE 1
4,
Goh (1994)       NE
13
Guchhait et al. (2013)       NE 1
Gupta & Singh (2013)       NE 9
Gupta et al. (2009)       NE 16
Hsu & Lowe (2001)        Ph 19

31
 Table 1: Continued

Application

Equation
Inventor Holding Cost Holding Cost Objective Solution
Deter Shor
y Type Dependency Function Type Function Techniques
Reference

-linearNon

General
Linear
Stock

Other

Profit

NAA

HAA
Time
EOQ

OEA

Com
EPQ

OEF
Cost
Step

Con
Var

Par
Hsu (2000)        NE 19
Hsu (2003)         NE 19
Karmakar (2016)        NE 1
Karuppasamy &
      NE 1
Uthayakumar (2018)
Khalilpourazari &
      NE 5
Pasandideh (2017)
Mahata & Goswami 4,
       NE
(2009) 13
Maity et al. (2008)      NE 24
Mishra & Singh (2011)       NE 1
Mishra (2013)       NE 1
Mishra et al. (2013)        NE 1
Mishra (2014)       NE 1
Muhlemann & Valtis-
     NE 11
Spanopoulos (1980)
O'Neill and Sanni
      NE 10
(2018)
Pal et al. (2015)        NE 20
Palanivel &
      NE 1
Uthayakumar (2015)
Pando et al. (2012a)      NE 13
Pando et al. (2012b)      NE 4
Pando et al. (2013)       NE 18
Patel & Sheikh (2017)       NE 1
Pervin et al. (2017)        NE 1
Pervin et al. (2018a)        NE 1
Pervin et al. (2018b)        NE 1
Rajan & Uthayakumar
      NE 6
(2017)
3,1
Rabbani et al. (2015)        NE
0
Rajeswari et al. (2017)        NE 1
Rastogi et al. (2017)       NE 1
Rangarajan & 
    NE 1
Karthikeyan (2015)
Roy (2008)      NE 1
San-José et al. (2015)       NE 5
San-José et al. (2018)       NE 4
Sazvar et al. (2013)       NE 4
Sen & Saha (2018)        NE 1
Scarpello & Ritelli
     NE 13
(2008)

32
 Table 1: Continued

Application

Equation
Inventory Holding Cost Holding Cost Objective Solution
Deter Shor
Type Dependency Function Type Function Techniques
Reference

-linearNon

General
Linear
Stock

Other

Profit

NAA

HAA
Time
EOQ

OEA

Com
EPQ

OEF
Cost
Step

Con
Var

Par
Scarpello & Ritelli
     NE 13
(2008)
Shah et al. (2013)       NE 3
Shao et al. (2000)      SG 1
Shao et al. (2005)      SG 1
Sharma et al. (2018)        NE 1
Shaw & Wagelmans
      NE 23
(1998)
Sivashankari (2016)        NE 1,7
Smith & Zhang
      NE 23
(1998)
Tayal et al. (2015)        NE 1
Teunter (2001)       NE 25
Tripathi & Mishra 2,
      NE
(2016) 8
Tripathi & Singh 7,
       NE
(2015) 12
Tripathi (2013)      NE 2
4,1
Tripathi (2018)       NE
3
Tripathy & Mishra
       NE 1
(2010)
Tyagi (2014)        NE 9
Tyagi (2015)        NE 21
Tyagi et al. (2014)        NE 22
Urban (2008)      NE 9
Valliathal &
       NE 7
Uthayakumar (2011)
Wahab & Jaber
     NE 17
(2010)
Weiss (1982)       NE 4
Yadav & Swami
       NE 6
(2018)
Yang (2014)      NE 12

Number
70

20

73

26

43

30

14

59

32

29

18
21

15

11
28

14

28
8

8
22.2

81.1

28.9

35.6

31.1
77.8

47.8

33.3

15.6

65.6

32.2

23.3

16.7

12.2

15.6

31.1
8.9

8.9

Percentage (%)
20

*
Key for Table 1

EOQ : Economic order quantity Con : Constant FP Food Processing

EPQ : Economic production quantity Var : Variable MI : Milk Industry
OEF : Optimum Exact Formulas Shor : Shortage SG : Steel Galvanization
OEA : Optimum Exact Algorithm Com : Completely Ph : Pharmaceutical Goods
NAA : Numerical Approximate Algorithm Par : Partiality VS : Vehicle Salvaging

33
 HAA : Heuristic Approximate Algorithm Deter : Deterioration NE : Numerical Example

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