Open AccessTHE INFLUENCE OF PROCESSING ON THE OPTIMAL INVENTORY POLICY FOR DETERIORATING PRODUCTS
Author(s) -
A. HEMMATI,
B. AFSHAR-NADJAFI
Publication year - 2017
Publication title -
latin american applied research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.123
H-Index - 23
eISSN - 1851-8796
pISSN - 0327-0793
DOI - 10.52292/j.laar.2017.314
Subject(s) - raw material , profit (economics) , product (mathematics) , computer science , mathematical optimization , process engineering , mathematics , economics , microeconomics , engineering , chemistry , geometry , organic chemistry
In this paper a deterministic inventory model is proposed to deal with deteriorating products. In the developed model the raw product deteriorates with a fixed rate, while processing the product prevents it from more deteriorating and safeguards it to conserve for a longer duration. In this problem, the raw product and the processed product have their own demand rate in a retailing system. However, when the inventory of the raw product depletes, a deterministic fraction of its consumers switch to the processed product. The mathematical formulation of the problem is developed to attain the optimal processing time of the raw product before it be stocked out which this results to a secondary processed product with acceptable quality. Concavity conditions for the annual total profit is derived and the optimal policy is suggested. Finally, the sensitivity of all parameters of the model and their impact on the optimal solution is analyzed.