DISCOUNTED COSTS, OBSOLESCENCE AND PLANNED STOCKOUTS WITH THE EOQ FORMULA

In this paper, we propose a simple economic order quantity for a class of inventory management problems concerning items with a short and st ochastic lifetime. The analysis is relevant to the management of items in industries subject to fast technological progress, where the obsol escence rate is large. The approach is performed in the framework of t he total discounted cost criterion. A new economic order quantity is c omputed; it may turn out to be significantly smaller than the one give n by Wilson formula. Finally, we show that a policy maker who faces th e risk of obsolescence, can plan stockouts if sufficiently many custom ers accept late delivery.