Two Kinds Of EPQ Model For Deteriorating Items

Inventory control is a key sector in operations management. In order to meet the demand of production and sales, Companies always build up some inventories. However, high inventory would occupy companies'cash flow, raise more holding cost and deteriorating cost, etc; while low inventory would lead to production halt and orders loss. Therefore, how to settle such problems in scientific management methods becomes the goal of inventory control.Based on the inventory model of production while demanded with different backlogging rate, an EPQ model was developed for deteriorating items. A numerical example and sensitivity analysis are presented to illustrate the model. It is proved that the deteriorating rate has different impacts on inventory control policy. Adjusting the production cycle and shortage time can cut down the inventory total cost.This model was applied in the inventory system of The Chongqing BELL Ltd. Co., whose optimal production cycle, optimal shortage cycle, optimal lots size and all costs were computed. The analysis indicates that the establishment of inventory policy with adopting EPQ model is able to highly reduce the cost of inventory system.The other EPQ model was developed for deteriorating items taking account of the time-value of costs with different production rate. A numerical example and sensitivity analysis are presented to illustrate the model by Mathematica software Version 5.0. It is proved that the parameters (including deteriorating rate, discount rate, production rate, backlogging rate, etc.) have different impacts on inventory control policy. The decision can be made by adjusting the number of production cycle and shortage time per cycle. It will cut down the total cost as low as possible.