Int. J.

Production Economics 144 (2013) 180–188

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Int. J. Production Economics

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

Production-inventory models for a damageable item with variable demands

and inventory costs in an imperfect production process
Partha Guchhait a,n, Manas Kumar Maiti b,1, Manoranjan Maiti a,2
a
Department of Applied Mathematics, Vidyasagar University, Midnapore 721102, Paschim-Medinipur, West Bengal, India
b
Department of Mathematics, Mahishadal Raj College, Mahishadal 721628, Purba-Medinipur, West Bengal, India

a r t i c l e i n f o a b s t r a c t

Article history: In this paper, economic production quantity (EPQ) models for breakable or deteriorating item are
Received 9 March 2012 developed with variable demands, being dependent on time or on-hand stock. Here rate of production
Accepted 29 January 2013 and holding cost are time dependent, unit production cost is a function of both production reliability
Available online 5 March 2013
indicator and production rate. Set-up cost is also partially production rate dependent. The production
Keywords: process produces some imperfect quantities which are instantly reworked at a cost to bring back those
Economic production quantity units to the perfect ones. The production process ultimately depends on both time and reliability
Imperfect production process indicator. The models are formulated as optimal control problems and the total profit functions with
Variable demand effect of inflation and time-value of money are expressed as finite integrals over the finite planning
Euler–Lagrange function
horizon. The problems are solved using Euler–Lagrange function based on variational calculus and
Reliability indicator
Newton–Raphson method to determine the optimal production reliability indicator (r) and then
Damageable item
corresponding production rates and total profits. In some cases, results of the models for deteriorating
item are obtained as particular cases from those of breakable item models. Similarly, results of simple
EPQ models (without damageability) are deduced as particular cases. Numerical experiments are
performed to illustrate the models both numerically and graphically.
& 2013 Elsevier B.V. All rights reserved.

1. Introduction
Items available in the market can be broadly classified into
two categories – damageable items and non-damageable items.
Damageable items again can be classified into two sub-categories
- deteriorating and breakable items. Deteriorating items are
deteriorated with time and as a result holding costs of these
types of items increase with time to check the increasing
deterioration. Normally, seasonal goods like fruits, vegetables,
X-mas cake, etc., are deteriorating in nature. Demands of these
items normally exist in the market for a finite time and obviously
these types of demands are dependent on time. Various types of
investigation have already been made by several authors on EOQ
and EPQ/EMQ models for time-dependent demand (Dave and
Patel, 1981; Datta and Pal, 1991; Chen, 1998; Lee and Hsu, 2009;
Sarkar et al., 2011; Maihami and Kamalabadi, 2012). Again
dependency of demand on stock for most of the items in the
market is well established phenomena. Some notable research
papers with stock-dependent demand are Levin et al. (1972),
Baker and Urban (1988), Pal et al. (1993), Hwang and Hahn
n
Corresponding author. Tel.: þ91 9434385976.
E-mail addresses: parthaguchhait@gmail.com (P. Guchhait),
manasmaiti@yahoo.co.in (M. Kumar Maiti), mmaiti2005@yahoo.co.in (M. Maiti).
1
Tel.: þ91 9434611765.
2
Tel.: þ91 9434944709.
(2000), Teng and Chang (2005), Soni and Shah (2008), Chang et al.
(2010), Stavrulaki (2011), Zhong and Zhou (in press) and Musa
and Sani (2012). Most of the above models have been formulated
with infinite time horizon assuming that demand of the items
exist over infinite time. According to this assumption product
specification remains unchanged for ever. But in reality it is
observed that unprecedental development of technology leads
to rapid change in product specifications with new features. As a
result, lifetimes of these types of products are normally finite and
demands depend on time obviously.
On the other hand items made of glass, clay, ceramic, etc.,
belong to breakable category. Mainly fashionable/decorating
items are made of glass, ceramic, etc., and demand of these types
of items exists over finite time only. As sale of these fashionable
products increases with the exhibition of stock, manufacturers of
these items face a conflicting situation in their business. To
stimulate the demand, they are tempted to go for huge number
of production to have a large display and in this process, invites
more damage to his units, as breakability increases with the
increase of piled stock and the duration of stress due to the stock.
Not much attention has been paid by the inventory practitioners
with these types of items. According to authors’ best knowledge
few articles in this direction have been published by Mandal and
Maiti (2000), Maiti and Maiti (2005) and Guchhait et al. (2010).
Now-a-days, in the metropolitan cities, holding-cost increases
with time. It increases due to increases in bank interest, etc.

0925-5273/$ - see front matter & 2013 Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.ijpe.2013.02.002
 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188
Moreover, set-up cost depends partially on the production rate.
Only few articles of inventory control problems have been
published with variable holding cost (Alfares, 2007; Urban,
2008) and set-up cost (Matsuyama, 1995; Darwish, 2008). Till
now, none has considered these assumptions in formulating the
inventory models for breakable/deteriorating items.
At present, it is not possible to ignore the effect of inflation as
the economy of any country changes rigorously due to high
inflation. Assuming these effects on inventory costs, first impetus
was given by Buzacott (1975). Among others, Beirman and Thomas
(1977), Datta and Pal (1991), Ray and Chaudhuri (1997) studied
some EOQ models with linear time-varying demand taking infla-
tion and time value of money into account. Wee and Law (2004)
addressed an inventory problem with finite replacement rate of
deteriorating items incorporating the effect of inflation and time
value of money. In the same year, Chang (2004) proposed an
inventory model for deteriorating items with trade credit under
inflation. In recent years, Sana (2010) and Sarkar et al. (2011)
presented two inventory models in this direction.
In most of the earlier production models, inventory practi-
tioners considered that all produced units are of perfect quality.
However, in reality, all manufactured units are not always of
perfect quality and directly affected by the reliability of the
production process. Issue of process reliability, quality improve-
ment and set-up time reduction have been discussed by Porteous
(1986). After that, Cheng (1989) and Chung and Hou (2003)
presented their models with imperfect production processes.
Among others Sana et al. (2007), Yoo et al. (2009), Sarkar et al.
(2010), Liao and Sheu (2011), Widyadana and Wee (2012), Dhouib
et al. (2012) and Yang et al. (in press) developed different types of
inventory models incorporating imperfect production process.
But, none has considered inventory model with variable produc-
tion rate, dynamic demand and reliability under the effect of
inflation and time-value of money, specially for breakable or
deteriorating item.
So in brief, the existing literature on damageable items, suffer
from the following limitations.
 Most of the production-inventory models are developed for
infinite time horizon (Porteous, 1986; Cheng, 1989; Maiti and
Maiti, 2005; Yoo et al., 2009, etc.). According to this assump-
tion, demand of an item remains unaltered for ever. In reality,
(Gurnani, 1983) rapid development of technology leads to the
change in product specifications with new features which in
turn, motivates the customers to go for new product. Hence
the inventory models should be developed and analyzed for a
finite period of time (Khanra and Chaudhuri, 2003; Maiti,
2011, etc.). But existing literature of inventory control on
damageable items overlooked this phenomenon (Maiti and
Maiti, 2005; Guchhait et al., 2010). For this reason, here a finite
time horizon production-inventory model of a damageable
item has been formulated and solved.
 Almost all inventory models are formulated with constant or
unit cost dependent holding cost (Sana, 2010; Sarkar et al.,
2011; Maiti, 2011). In reality, due to inflation, bank interest,
rental charges, preservation cost, etc., it increases with time.
Thus some factors contributing to the holding cost change
with time (Giri et al., 1996) and others remain constant. Also
set-up cost depends on production rate as high production rate
require sophisticated modern machineries. In this paper,
holding and set-up costs are considered as functions of time
and production rate, respectively.
 In imperfect production-inventory models, reliability of the
production process is considered by researchers in two different
approaches. In the first approach, a fraction rð0 or r 1Þ (called
181
process reliability) of produced units are considered as fresh
units and remaining (i.e., ð1rÞ of the produced units) are
defective units. Some authors considered r as crisp (Cheng,
1989; Maiti and Maiti, 2005) and others considered as random
(Yoo et al., 2009; Liao and Sheu, 2011) and tried to determine
optimal r to optimize cost or profit. In their considerations
production may be 100% perfect by introducing high quality
machineries, which is unrealistic in most of the real life produc-
tion systems. In reality manufactures are highly satisfied if r
reaches a maximum level and they never allow r to fall below a
minimum level. Considering this phenomenon, in second
approach, recently some works have been done by Sana (2010),
Sarkar et al. (2011) and Sarkar (2012). Due to feasibility, in the
present investigation, the second approach is considered.
 It is a common business practice that customers are allured
with displayed stock and for that, demand is considered as
stock-dependent (Levin et al., 1972; Baker and Urban, 1988;
Alfares, 2007; Stavrulaki, 2011, etc.). But, in the case of break-
able items, manufacturer cum retailers are in dilemma to have
large displayed stock as increased stock invites more break-
ability along with more sale. Hence, a balance is to be
maintained between increased breakability and sale for max-
imum profit. Till now, little attention has been paid by the
inventory practitioners to consider this phenomena for a
production-inventory problem of damageable items (Maiti
and Maiti, 2005). Here optimum reliability indicator and then
inventory level for breakable items (such as units made of
china-clay, mud, ceramic, etc.) keeping a balance between
increased sale and wastage are found to have maximum profit.
 Variational principle is a simple technique for the analysis of
optimal control problems. Very few researchers have devel-
oped the production-inventory models as optimal control
problems and solved using this method (Sarkar et al., 2011).
The present problem has been solved by this method.
 Moreover, in most of the above models, unit production cost is
assumed to be constant. In practice, it varies with production
rate, raw material cost, labour charge, wear and tear cost and
reliability of the production process (Khouja, 1995). In this
investigation, unit production cost is dependent on production
rate, reliability indicator, raw material, labour charge and
wear-and-tear costs.
 Till now, no research work is reported taking the above
features into account in a single model. Sana (2010) recently
presented an imperfect production-inventory model for a non-
breakable item with three types of demands taking some of
the above assumptions into consideration along with constant
holding. As mentioned earlier, units made of china-clay,
ceramic, etc., have a special property of getting broken due
to stress and this breakability increases with time. Here for the
first time, a production-inventory model is formulated and
analyzed for such materials with general form of breakability
and variable inventory costs. Optimum results have been
derived with three types of demand, of which one increases
with time at a decreasing rate, not considered by others.
In this paper, a production-inventory model with imperfect pro-
duction process is considered for a breakable or deteriorating (as a
particular case) item over a finite time horizon. The production rate
varies with time. Here different models have been formulated with
different types of demand function i.e., time dependent or stock-
dependent. Set-up cost is partially production rate dependent and
holding cost is also partially time dependent. The unit production
cost is a function of production rate, raw material cost, labour
charge, wear and tear cost and product reliability indicator. The
models are formulated as optimal control problems for the max-
imization of total profits over the planning horizon and optimum
182 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188
profits along with optimum reliability indicator (r) are obtained
using Euler–Lagrange equation based on variational principle and
Newton–Raphson method. Numerical experiments are performed
to illustrate the models. The significance of some parameters on
the proposed models are also pointed out. Results are presented in
both tabular and graphical forms.
2. Assumptions and notations for the proposed model
The following notations and assumptions are used in devel-
oping the model:
(i) In this imperfect production-inventory system, only one
item is produced and sold.
(ii) As life of an item, specially seasonal and fashionable
products, is limited, the planning horizon for the model
under consideration, T is finite.
(iii) q(t) is inventory level at any time tð Z0Þ. Here it is assumed
that inventory levels at t ¼0 and t ¼T are zero. Though the
production P(t) is an increasing function of time t, D(t),
Bðq,tÞ and their relation with P(t) are assumed in such a way
that at the beginning (t ¼0) and end (t ¼T) of the produc-
tion system, inventory is zero. Thus initial and terminal
inventory-level are zero.
_
(iv) qðtÞ is derivative of qðtÞ with respect to t.
(v) The units made of China-clay, glass, ceramic, mud, etc., are
kept in showrooms as heaped stocks. Due to this, units at
the bottom are under stress and being stressed continu-
ously for some time, break or get cracked. Thus breakability
rate of such an item depends on accumulated stress of
stock level as well as how long the item is under stress. So
breakability rate of the item Bðq,tÞ is assumed as a function
of stock level and time and is of the form:
Bðq,tÞ ¼ b10 qþ b11 t for q 40
where b10, b11 are parameters estimated to best fit the
breakability function.
(vi) For seasonal/ fashionable products, demand increases with
time though their business period is limited and finite. For
seasonal luxury goods, now-a-days, customers are
attracted by the gorgeous attractive electronic display of
stock in the show-room. Thus more exhibition of stock
invites more demand i.e., demand increases with stock.
Here demand rate is assumed to be either time-dependent,
D(t) or linearly stock-dependent D(q).
(vii) Production increases with time i.e., P(t) is the production
rate at any time, t.
(viii) r is the ‘indicator of production reliability’. It represents
defective rate of the production. Thus the rate of producing
defective units is rP(t).
(ix) rmin and rmax are minimum and maximum values of r,
respectively.
(x) l is the variation constant of tool/die costs.
(xi) wðrÞ is the development cost for production system at a
stage with production reliability indicator, r and represents
as (cf. Mettas, 2000 and Sana, 2010)
wðrÞ ¼ N 1 þ N2 eC A ðrmax rÞ=ðrrmin Þ ,
where N1 is the fixed cost like labor, energy, etc., and is
independent of r. N2 is the cost of technology, resource and
design complexity for production when r ¼ r max . CA repre-
sents the difficulties in increasing reliability, which
depends on the design complexity, technology and resource
limitations, etc.
(xii) Unit production cost, cp, is a function of production relia-
bility indicator and production rate P(t) and is of the form
wðrÞ
cp ðr,tÞ ¼ cr þ þ lPðtÞ,
PðtÞ
where cr is the fixed material cost. Second term is the
development cost which is equally distributed over the
production P(t) at any time t. And the third term lPðtÞ is
tool/die cost which is proportional to the production rate.
(xiii) cd is the rework cost per defective item.
(xiv) In reality, due to inflation, bank interest, hiring charge, etc.,
increase with time. Thus some factors contributing to the
holding cost changes with time and other remain constant.
Hence ch(t), the holding cost per unit time changes with time
and can be assumed to be of the form: ch ðtÞ ¼ c10 þc11 t,
where c10 and c11 are constants.
(xv) Set-up cost, c3 , is normally constant with time. But, if dynamic
production rate is considered, some machineries, etc., are to be
set-up and maintained in such a way that the production
system can stand with the pressure of increasing demand.
Thus a part of c3 is linearly proportional to production rate and
hence c3 is of the form: c3 ðPðtÞÞ ¼ c30 þc31 PðtÞ, where c30 and
c31 are constants.
(xvi) In the developing countries, inflation is predominant and
interest rate depends on the inflation value. Thus m ¼ Ri,
where R and i are the interest and inflation per unit
currency, respectively.
(xvii) sp is the unit selling price.
3. Mathematical formulation of the model
In this production process, the system produces perfect quality
as well as imperfect quality units. Imperfect quality products are
reworked immediately at a cost to restore its quality to the original
one. The parameter r is an indicator of product reliability. If the
production reliability indicator r decreases, the system becomes
more reliable i.e., smaller value of r provides better quality product.
The inventory level decreases owning to demand and dete-
rioration. Thus, the change of production and inventory level can
be represented by the following differential equation:
dqðtÞ
¼ PDBðq,tÞ,
dt
i:e:; P ¼ q_ þ Dþ B,
with qð0Þ ¼ 0 and qðTÞ ¼ 0, ð1Þ
where D is a function of q or t i.e., D(q) or D(t), P and B stand for
P(t) and Bðq,tÞ, respectively.
The end conditions qð0Þ ¼ 0 ¼ qðTÞ indicate that in this
production-inventory system, as P(t), D(t) and Bðq,tÞ are function
of time and increase with time, P(t) is such that PðtÞ 4DðtÞ þ Bðq,tÞ
and during the first part of the system cycle, inventory builds up.
After some time, D(t) is more than P(t) and due to the combined
effect of DðtÞ þ Bðq,tÞ, the accumulated stock is depleted as
PðtÞ o DðtÞ þ Bðq,tÞ and ultimately reduces to zero.
The relevant profit function, incorporating inflation and time
value of money during ½0,T is (using Eq. (1))
Z T
PT ¼ emt ½sp Dcp ðr,tÞPðtÞcd rPðtÞch ðtÞqc3 ðPðtÞÞ dt:
0
Z T
¼ emt ½sp Dðcr þ cd rÞðq_ þD þBÞwðrÞlðq_ þ Dþ BÞ2
0
ðc10 þc11 tÞqfc30 þc31 ðq_ þD þ BÞg=T dt:
Z T
¼ _ dt,
Zðq, q,tÞ ð2Þ
0
 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188 183

where integral is given by

_ ¼e
Zðq, q,tÞ mt
½sp Dðcr þ cd rÞðq_ þ Dþ BÞwðrÞlðq_ þ D þBÞ 2 1
½HðtÞ
ðc10 þ c11 tÞqfc30 þ c31 ðq_ þD þBÞg=T ð3Þ D21 mD1 b10 ðb10 þ mÞ
 
d
Now, the problem is to find the optimal path of q(t) and P(t) for ½Here D1  represents differential operator ð8Þ
dt
which PT is maximized.
ct
Lemma 1. PT has a maximum for a path q ¼ qðtÞ in the interval ½0,T. Model-1. When demand, DðtÞ ¼ abe ða,b,c 40Þ, increases
with time at a decreasing rate, then the solution of Eq. (7) is
Proof. PT depends on the path q ¼ qðtÞ in between t¼ 0 and t ¼T.
qðtÞ ¼ IC 1 eðb10 þ mÞt þIC 2 eb10 t þ K 6 ect þ K 7 t þ K 8 , ð9Þ
Let us take the path p0 is given by q ¼ q0 ðtÞ for which PT has a
maximum value. Also suppose that the class of neighboring and the corresponding production rate is
curves pr is given by q ¼ qr ðtÞ ¼ q0 ðtÞ þ rxðtÞ, where r is a small
PðtÞ ¼ K 9 eðb10 þ mÞt þ K 10 ect þK 11 t þ K 12 , ð10Þ
constant and xðtÞ ( 4 0, all values of t) is an any differentiable
function of t. Therefore, the value of PT for the path pr is given by where K 1 ¼ fðb10 þ mÞðcr þ cd rÞ þ c10 g=2l, K 2 ¼ aðb10 þ mÞb11 ,
RT K 3 ¼ b11 ðb10 þ mÞ þ c11 =2l, K 4 ¼ fbðb10 þ mÞ þbcg, K 5 ¼ K 1 þ K 2 ,
P T ðrÞ ¼ 0 Z r dt, where Z r ¼ Zðq0 ðtÞ þ rxðtÞ, q_ 0 ðtÞ þ rx_ ðtÞ,tÞ.
K 6 ¼ K 4 =fc2 þ mcb10 ðb10 þ mÞg, K 7 ¼ K 3 =fb10 ðb10 þ mÞg, K8 ¼
For maximum value of PT ðrÞ, we have d=drðPT ðrÞÞ9r ¼ 0 ¼ 0 and mK 3 =b10 ðb10 þ mÞK 5 =b10 ðb10 þ mÞ, K 9 ¼ Að2b10 þ mÞ, K 10 ¼ K 6
2
d =dr2 fPT ðrÞg9r ¼ 0 o 0. Here, ðb10 cÞb, K 11 ¼ K 7 b10 þb11 and K 12 ¼ a þK 7 þ b10 K 8 .
Using the boundary conditions qð0Þ ¼ 0 ¼ qðTÞ in Eq. (9), we can
Z T  get the values of IC1 and IC2. Substituting the expression for q(t)
d @Z r _ @Z r
ðPT ðrÞÞ ¼ xðtÞ þ x ðtÞ dt and P(t) in Eq. (2) the corresponding profit function reduces to
dr 0 @q @q_
Z T   Z T   Z T
@Z r @Z r T d @Z r
¼ xðtÞ dt þ xðtÞ  xðtÞ dt PT ¼ emt ½sp Dðcr þcd rÞðq_ þ Dþ BÞwðrÞlðq_ þD þBÞ2
0 @q @q_ 0 0 dt @q_ 0
  Z T    ðc10 þc11 tÞqfc30 þc31 ðq_ þ Dþ BÞg=T dt
@Z r T @Z r d @Z r      b10 T 
¼ xðtÞ þ xðtÞ  dt 1emT 1eðc þ mÞT e 1
@q_ 0 0 @q dt @q_ ¼ sp a b fcr þ rcd þ c31 =Tg K 9
Z T    m cþm b10
@Z r d @Z r       
¼ xðtÞ  dt ð4Þ 1eðc þ mÞT 1 mT T 1 1emT
0 @q dt @q_ þ K 10 þ K 11 e þ þ K 12
cþm m2 m m2 m
As q(t) is fixed at the end points t¼0 and t ¼T, so, xð0Þ ¼ xðTÞ ¼ 0.     

1emT eð2b10 þ mÞT 1
Therefore, d=drððP T ðrÞÞ9r ¼ 0 ¼ 0 gives  wðrÞ þ c30 =T l K 29
m 2b10 þ m
 ð2c þ mÞT

1e
  þK 210
@Z r d @Z r 2c þ m
 ¼ 0: ( !)  
@q dt @q_ 2 mT T
2
2T 2 1emuT
þK 11 e þ 2þ 3 þK 12
m3 m m m m
 ðb10 cÞT

Which is the necessary condition for extreme value of PT . Again, e 1
þ2K 9 K 10
2 Z T( 2
)
(
b10 c
! )
d 2 @ Zr _ @2 Z r _ 2 @2 Z r  b10 T 
fðP T ðrÞg ¼ x þ 2xx þx dt, T 1 1 e 1
dr2 0 @q2 @q@q_ @q_ 2 þ2K 9 K 11 eb10 T  2 þ 2 þ 2K 9 K 12
b10 b b10 b10
10
( !)
i.e., 1 T 1
 Z T( ) þ2K 10 K 11 eðc þ mÞT þ
2  2 2 2 ðc þ mÞ2 c þ m ðc þ mÞ@
d  2 @ Zr _ @ Z r þ x_ 2 @ Z r dt
fðP T ð rÞg ¼ x þ2 x x     
dr2 
r¼0 0 @q2 @q@q_ @q_ 2 1eðc þ mÞT 1 mT T 1
þ2K 10 K 12 þ K 11 K 12 e þ
Z T n o cþm m2 m m2
2   b10 T     
2lemt x b10 þ 2xx_ b10 þ x_
2 2
¼ dt e 1 1e ðb10 þ mÞT
1eðc þ mÞT
0 c10 IC 1 þ IC 2 þK 6
b10 b10 þ m cþm
o0 ðas 2lemt 40Þ ð5Þ     
mT
1 T 1 1e
2
Hence the sufficient condition, d =dr2 fP T ðrÞg9r ¼ 0 o0 shows that þK 7 emT þ þ K8
m2 m m2 m
" ( ! )
PT has a maximum in ½0,T & T 1 1
c11 IC 1 eb10 T  þ 2
Now, the Euler–Lagrange’s equation for the maximum value of b10 b2 b10
10
( !)
PT is 1 T 1
ðb10 þ mÞT
  þIC 2 e þ
@Z d @Z ðb10 þ mÞ2 b10 þ m ðb10 þ mÞ2
 ¼ 0: ð6Þ ( !)
@q dt @q_
1 ðc þ mÞT T 1
þK 6 e þ
Using (2) and (3), we have ðc þ mÞ2 c þ m ðc þ mÞ2
  2 
€ mqb
q _ 10 ðb10 þ mÞq ¼ HðtÞ, ð7Þ 2 t 2T 2
þK 7 emT þ 2þ 3
where
m 3 m m m
  
  1 m T T 1
þK 8 e þ 2 ð11Þ
_ þ b11 ðb10 þ mÞ þ ðcr þrcd þ c31 =TÞðb10 þ mÞ þ ch
HðtÞ ¼ ðb10 þ mÞDD
2
m m m
2l
The complementary function of Eq. (7) is IC 1 eðb10 þ mÞt þ IC 2 eb10 t , Model-1A (Model for deteriorating item). If we take b11 ¼ 0 in the
where IC1 and IC2 are arbitrary constants and the particular above model (Model-1), then it reduces to a production-inventory
184 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188

    
model for deteriorating item with constant deterioration. Total 1 T 1 1emT
þK 6 emT þ þ K7
profit for this model is obtained from (11) putting b11 ¼ 0. m 2 m m2 m
 
Model-1B (Model without deterioration). If we take b10 ¼ 0 in the 1emT
fwðrÞ þ c30 =Tg
above model (Model-3A), then the present model represents an m
"   ( !)  
inventory model without deterioration. As b10 appears in the e2L1 m 1 2 2
1emT
 mT T 2T 2
denominator of the expression (11), it is not possible to put l K 25 2
þ K6 e þ 2þ 3 þ K 27
2L1 m m 3 m m m m
b10 ¼ 0 directly in (11) to obtain the profit expression. Thus, In ( ! )
this case, the corresponding profit function is calculated omitting T 1 1
Bðq,tÞ in (1) and then proceeding in the same way as in Model-1. þ2K 5 K 6 eðL1 mÞT  þ Þ
L1 m ðL1 mÞ2 ðL1 mÞ2
 ðL1 mÞT 
Model-2. Demand is partly linearly stock-dependent i.e., of the e 1
form: DðqÞ ¼ a þ bqðtÞ. þ2K 5 K 7
L1 m
For this model, the profit is given by   
1 m T T 1
Z T þ2K 6 K 7 e þ
2 m 2 m m
PT ¼ _ dt,
Zðq, q,tÞ ð12Þ " ( ! )
0 T
ðL1 mÞT 1 1
c11 IC 1 e  þ Þ
where L1 m ðL1 mÞ2 ðL1 mÞ2
( !)
_ ¼ emt ½sp Dðcr þ cd rÞðq_ þD þ BÞwðrÞlðq_ þ D þBÞ2
Zðq, q,tÞ 1 T 1
þIC 2 eðL2 þ mÞT þ
ðc10 þ c11 tÞqfc30 þ c31 ðq_ þ D þBÞg ðL2 þ m L2 þ m ðL2 þ mÞ2
( !)
2
2 mT T 2T 2
þK 3 e þ 2þ 3
The necessary condition for optimal path for inventory, q(t) is 3 m m m m
obtained from   
1 T 1
  þK 4 emT þ ð16Þ
@Z d @Z m2 m m2
 ¼ 0:
@q dt @q_

From this, we have Model-2A (Model for deteriorating item). As before, if we take
€ mqðbþ b11 ¼ 0 in the above model (Model-2), then it reduces to a
q _ b10 Þðb þ b10 þ mÞq ¼ K 1 þK 2 t, ð13Þ
production-inventory model for deteriorating item and the total
where profit expression is obtained from (16) putting b11 ¼ 0.
 
ðcr þ rcd þ c31 =TÞðb þb10 þ mÞsp b þ c10
K1 ¼ b11 þ d10 ðb þb10 þ mÞ Model-2B (Model without deterioration). In the same way, if we
2l
take b10 ¼ 0 in the above model (model-2A) i.e., putting both
and b11 ¼ 0 ¼ b10 in (16) (Model-2), then this represents an inventory
model without deterioration and the corresponding profit func-
K 2 ¼ ½b11 ðb þ b10 þ mÞ þc11 =2l
tion is obtained.

Therefore, the solution of Eq. (13) is given by Particular case. If we take c11 ¼ 0 and omit set-up cost in Model-
2B, the profit expression (16) reduces to (18) of Sana (2010).
qðtÞ ¼ IC 1 eL1 t þ IC 2 eL2 t þ K 3 t þ K 4 ðwhere IC 1 and IC 1 are integral constantÞ:
ð14Þ Model-3. When demand function is time-dependent increasing
with time at an increasing rate i.e., DðtÞ ¼ aebt ða,b 40Þ then
And the production rate is solution of Eq. (7) is given by
PðtÞ ¼ K 5 eL1 t þ K 6 t þK 9 , ð15Þ
qðtÞ ¼ IC 1 eðb10 þ mÞt þIC 1 eb10 t þ K 4 ebt þK 5 t þ K 6 ð17Þ
where L1 ¼ bþ b10 þ m, L2 ¼ b þ b10 , d ¼ L1 L2 , K 3 ¼ K 2 =d,
2
where IC1 and IC2 are integral constants, K 1 ¼ aðb10 þ mbÞ,
K 4 ¼ ðmK 2 dK 1 Þ=d K 5 ¼ AðL1 þ b þb10 Þ, K 6 ¼ K 3 ðb þb10 Þ þb11 and K 2 ¼ b11 ðb10 þ mÞ þ c11 =2l, d ¼ b10 ðb10 þ mÞ, K 3 ¼ ½ðcr þ rcd þc31 =TÞ
K 7 ¼ K 3 þa þ K 4 ðb þ b10 Þ. 2
ðb10 þ mÞ þ c10 2lb10 =2l, K 4 ¼ K 1 =ðb mbdÞ, K 5 ¼ K 2 =d and
2
Using the boundary conditions qð0Þ ¼ 0 ¼ qðTÞ, we have K 6 ¼ ðmK 2 dK 3 Þ=d .
IC 1 ¼ ½K 4 ð1eL2 T Þ þ K 3 T=ðeL2 T eL1 T Þ, Using the boundary conditions qð0Þ ¼ 0 ¼ qðTÞ, we have from Eq.
(17)
and
IC 1 ¼ ½K 4 ðebT eb10 T Þ þK 6 ð1eb10 T Þ þ K 5 T=ðeb10 T eðb10 þ mÞT Þ ð18Þ
IC 2 ¼ ½K 4 ð1eL1 T Þ þ K 3 T=ðeL1 T eL2 T Þ:
IC 2 ¼ ½K 4 ðebT eðb10 þ mÞT Þ þK 6 ð1eðb10 þ mÞT Þ þ K 5 T=ðeðb10 þ mÞT eb10 T Þ
Substituting the values of on-hand inventory q(t) and produc- ð19Þ
tion rate P(t) in Eq. (12), the profit function is deduced as
Z T   Therefore the production rate PðtÞ is given by
1emT
PT ¼ _ dt ¼ sp a
Zðq, q,tÞ PðtÞ ¼ K 7 eðb10 þ mÞt þ K 8 ebt þK 9 t þ K 10 , ð20Þ
0 m
  ðL1 mÞT   
e 1eðL2 þ mÞT where K 7 ¼ IC 1 ð2b10 þ mÞ, K 8 ¼ a þ ðbþ b10 ÞK 4 , K 9 ¼ b10 K 5 þ b11 and
þ ðsp bc10 Þ IC 1 þIC 2
L1 m L2 þ m K 10 ¼ K 5 þb10 K 6
    
1 mT T 1 1emT Hence, q(t) and P(t), given by Eqs. (17) and (20), respectively,
þ K3 e þ þ K 4
m2 m m2 m are the required optimal path of inventory and production rate.
  L1 m 
e 1 Now, substituting the values of the on-hand inventory q(t) and
ðcr þ rcd þ c31 =TÞ K 5
L1 m production rate P(t) in Eq. (2), the corresponding profit function
 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188 185

( !)
reduces to 1 ðbmÞT T 1
Z T  ðbmÞT  þ2mIC 2 K 6 T þ 4K 7 K 5 þe 
e 1 ðbmÞ2 bm ðbmÞ2
PT ¼ _ dt ¼ sp a
Zðq, q,tÞ
0 bm eðbmÞT 1
  b10 T   ðbmÞT  þ2K 6 K 7
e 1 e 1 bm
ðcr þ rcd þ c31 =TÞ K 7 þ K8   
b10 bm 1 m T T 1
( )  # þ4K 5 K 6 e þ
1 Te mT
e m T
1e m T 2 m 2 m m
þ K9   Þ þK     ðbmÞT 
m2 m 2 m 10
m 1emT e 1
c10 IC 1 þIC 2 T þ K 4
  m bm
1emT ( !)   #
fwðrÞ þc30 =Tg 2 2
m þK 5 emT T þ 2T þ 2 þ K
1
em T T
þ
1
  ð2b10 þ mÞT   ð2bmÞT    6
e 1 e 1 1emT
3 m 2 m 3 m 2 m 2 m m m
l K 27 þK 28 þK 210    
2b10 þ m 2bm m 1 T 1
 ðb10 þ bÞT  ( !) c11 IC 1 emT þ 2 þ IC 2 T 2 =2
2
e 1 2 mT T 2T 2 m2 m m
þ 2K 7 K 8 þK 29 e þ þ ( !)
b10 þ b m3 m m2 m3 1 T 1
ðbmÞT
( )   þK 4 þe 
Teb10 T eb10 T 1 eb10 T 1 ðbmÞ2 bm ðbmÞ2
þ 2K 7 K 9  2 Þ þ 2 þ 2K 7 K 10 ( !)
b10 b10 b10 b10 6 3T 2 6T
mT T 6
( ) þK 5 e þ 2 þ 3þ 4
TeðbmÞT eðbmÞT 1
4 m m m m m
þ 2K 8 K 9  þ ( !)#
bm ðbmÞ2 ðbmÞ2 2 T 2
2T 2
 ðbmÞT  ( )# þK 6 emT þ þ ð22Þ
e 1 1 TemT emT m3 m m2 m3
þ 2K 8 K 10 þ 2K 9 K 10   2
bm m2 m m
 b10 T
 ðb10 þ mÞT
  ðbmÞT  Particular case. If we take c11 ¼ 0 and omit set-up cost in Model-
ðe 1Þ 1e e 1
c10 IC 1 þ IC 2 þ K4 3B, the expression (22) reduces to (14) of Sana (2010).
b10 b10 þ m bm
    
1 mT T 1 1emT
þ K5 e þ þ K6 4. Solution procedure
m2 m m2 m
" ( ! )
T 1 1 It has been already proved that there exists a path q ¼ qðtÞ, in
c11 IC 1 eb10 T  þ 2
b10 b2 b10 the interval ½0,T for which PT has a maximum. Again, with the
10
( )
ðb10 þ mÞT known parameters other than the reliability indicator, r, the total
1 Te eðb10 þ mÞT
þ IC 2   profit expressions, PTs, due to different demands (D) given by (11),
ðb10 þ mÞ2 b10 þ m ðb10 þ mÞ2
( ! ) (16) and (21) become functions of a single variable r. To find the
T 1 1 optimum value of r, the first order derivatives of these functions
þ K 4 eðbmÞT  þ
bm ðbmÞ2 ðbmÞ2 with respect to r, ðdP T =drÞ s are made equal to zero. Thus in each
( !)   # case, we get a transcendental equation on r, dP T =dr ¼ 0 and are
2
2 m T T 2T 2 1 m T T 1 solved using Newton–Raphson method. With these values of r,
þ K5 e þ þ þ K 6 e þ
m 3 m 2
m m 3 m 2 m m 2 2 2
second order derivatives of PTs with respect to r, ðd P T =dr Þ s are
2 2
ð21Þ calculated separately. It is found that d P T =dr o 0 for those
values of r. For maximum profit, the appropriate values of r are
Model-3A (Model for deteriorating item). As before, putting taken and the corresponding profits are calculated for different
b11 ¼ 0 in (21) total profit is obtained for a production-inventory demands. Again the profit functions are optimized using LINGO-
model with constant deterioration. 09 software and the results obtained are same as those obtained
by the previous numerical method. So it can be stated that the
Model-3B (Model without deterioration). As ‘b10 ¼ 0’ cannot be result obtained following the procedure for a demand pattern is a
put in the above model (Model-3A), the corresponding profit global optimum.
function for the inventory model without deterioration is calcu-
lated proceeding in the same way as in Model-3. Thus, In this
case, the corresponding profit function is calculated omitting 5. Numerical experiment
Bðq,tÞ in (1) and then proceeding in the same way as in Model-
3. Hence,
Model-1. The following parametric values are used to illustrate
  ðbmÞT 
e 1 the model: a ¼ 290, b ¼ 250, c ¼ 2, l ¼ 0:02, R ¼ 0:15, i ¼ 0:13,
P T ¼ K 2 dIC 2 T þK 7
bm cr ¼ 21, cd ¼ 10, c10 ¼ 2, c11 ¼ 0:2, c30 ¼ 100, c31 ¼ 0:02, C A ¼ 0:2,
     sp ¼ 75, b10 ¼ 0:05, b11 ¼ 1:5, r max ¼ 0:8, r min ¼ 0:1, N 1 ¼ 120,
1 mT T 1 1emT
þ 2K 5 e þ þ K 6 N2 ¼ 150, T¼1.
m 2 m 2 m m
 
1emT Model-2. In this model i.e., in the case of stock-dependent
fwðrÞ þ c30 =Tg
m demand, input data of all parameters are same as Model-1 except
  mT   ð2bmÞT   
e e 1 1emT b ¼ 0:7, and c ¼0.
l m2 ðIC 2 Þ2 þ K 27 þ K 26
m 2bm m
( !) Model-3. In this model i.e., for exponentially time-dependent
2
2 T 2T 2 demand, values of all parameters are same as Model-2.
þ 4K 25 emT þ 2þ 3
m3 m m m
  With these input data, the optimum values of r and the
bT
e 1 corresponding profits, PTs, for different models are obtained and
þ 2mIC 2 K 7 þ 4mIC 2 K 5 T 2 =2
b tabulated in Table 1.
186 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188

Table 1
Optimum results of Models-1, 2 and 3.

Model-1 Model-1A Model-1B Model-2 Model-2A Model-2B Model-3 Model-3A Model-3B

r 0.2531 0.2534 0.2533 0.2263 0.2264 0.2263 0.2165 0.2166 0.2166

PT 7999.35 8022.71 8071.56 13 113.63 13 137.76 13 225.15 17 290.11 17 320.34 17 381.84

Fig. 3. Time vs. unit production cost and set-up cost (Model-1).

Fig. 1. Time vs. production, demand and inventory (Model-1).

Fig. 4. Time vs. production, demand and inventory (Model-2).

Fig. 2. Reliability vs. profit and development cost (Model-1).

With the optimum value of r, pictorial representation of

inventory, production and demand against time, profit and
development cost against reliability indicator, unit production
cost and set-up cost against time for Model-1 are presented in
Figs. 1–3, respectively. Similar graphical representations for
Models-2 and -3 are given in Figs. 4–9, respectively.

6. Discussion

For the assumed parametric values, it is found (cf. Table 1) that

profits for the models without damageability (Models-1B, -2B and
-3B) give more profits than the corresponding models with
damageability (Model-1, -1A, -2, -2A, -3 and -3A). It happens
because profits decrease due to the damageability of the units.
Also it is revealed that the models of deteriorating items (Models- Fig. 5. Reliability vs. profit and development cost (Model-2).
1A, -2A and -3A) fetch more profit than the corresponding models
of breakable items (Models-1, -2 and -3). It is because damage- demand i.e., Model-3, provides maximum profit compared with
ability rates for breakable items are higher than that of deterior- the other models. All these observations agrees with reality.
ating items. Again, the production-inventory models with Process reliability indicator plays an important role in any
exponentially time-dependent (increasing with increasing rate) profit making manufacturing system. Reliability indicator of a
 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188
Fig. 6. Time vs. unit production cost and set-up cost (Model-2).
Fig. 7. Time vs. production, demand and inventory (Model-3).
production process can be controlled using high quality machi-
neries and expert manpower. Here it is found that for the
exponentially time-dependent demand (increasing with decreas-
ing rate i.e., for Model-1), reliability indicator is higher than the
other two types of demands. So decision maker may arrange his/
her manufacturing process accordingly knowing the demand
pattern with respect to time.
For stock-dependent demand (Model-2), initial production rate is
very high to make a considerable stock to attract the customers.
After that, production rate gradually decreases in such a manner
that demand of the product in the market is just met. This finding is
obtained from our investigation (cf. Fig. 4). Again for time-depen-
dent demand (Models-1 and -3) production rate increases with time
as demand increases with time. This phenomenon is also verified in
our experiment (cf. Figs. 1 and 7). It is interesting to note from the
figures (cf. Figs. 1, 4 and 7) that as the terminal conditions for stock
are qð0Þ ¼ 0 ¼ qðTÞ, initially production is more than the combined
amount of both demand and breakability. But, after some time,
when considerable stock is built-up i.e., when the stock level
becomes highest, demand is more than the production so that to
meet the demand, after allowing breakability, stock gradually
reduces and ultimately becomes zero at t¼T. Also from pictorial
representation of profit against reliability indicator, it is found that
optimum profit (PT) is attained for a particular value of r (cf. Figs. 2,
5, and 8), for different models, which again supports our solution
methodology. In these figures, corresponding development costs are
also plotted. It can be seen that in these models, the development
cost sharply decreases for initial increase of r and then becomes
almost constant for higher value of r (i.e., decreasing rate is very
187
Fig. 8. Reliability indicator vs. profit and development cost(Model-3).
Fig. 9. Time vs. unit production cost and set-up cost (Model-3).
low). The profit function, at the beginning, increases with r, then
attains maximum value and decreases gradually for the increase of r.
Profit becomes maximum when development cost begins to
decrease very slowly. As set-up cost (c3) is partially production rate
(P(t)) dependent, for stock-dependent demand, it decreases with
time as P(t) decreases with time (cf. Fig. 6). On the other hand c3
increases with time for the time-dependent demands as P(t)
increases with time in these cases (cf. Figs. 3 and 9). Similar
observations are made for unit production costs (cf. Figs. 3, 6, and 9).
7. Conclusion
For the first time a production-inventory model for damage-
able item is developed, where reliability indicator of the produc-
tion process together with the production rate is controllable. It is
observed that an optimum reliability indicator draws maximum
profit for an item having particular demand pattern. Also it is
found from our findings that minimum unit production cost for
an item does not give the maximum profit always. It is also
verified that time dependent production rate fetches more profit
for stock and time-dependent demand. From the present model it
can be concluded that optimal control of production rate reduces
holding cost as well as damageability which in turn increases
profit separately for breakable/deteriorating items. The preset
investigation reveals that process reliability indicator is an
important factor which determines the production rate and thus
determines the optimal production path, unit production cost and
optimal profit for the production-inventory managers. The
188 P. Guchhait et al. / Int. J. Production Economics 144 (2013) 180–188
models are also solved taking some of the inventory costs as
general fuzzy number. The present models can be extended to the
rough, fuzzy-rough, random, fuzzy-random environment taking
constant part of holding cost, set-up cost, etc. as uncertain in
nature.
Acknowledgments
The authors are heartily thankful to the Honorable Reviewers
for their contractive comments to improve the quality of the
paper. Also, first author expresses his heartfelt gratitude to his
mother in law, wife and son for their encouragement and
dedication related to this paper. This research work is supported
by University Grants Commission of India with Grant no. PSW-
089/11-12.
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