AN EOQ MODEL FOR DETERIORATING ITEMS WITH LINEAR TIME-DEPENDENT DEMAND RATE AND SHORTAGES UNDER INFLATION AND TIME DISCOUNTING

An economic order quantity (EOQ) inventory model for deteriorating goo ds is developed with a linear, positive trend in demand allowing inven tory shortages and backlogging. The effects of inflation and the time- value of money are incorporated into the model, considering two separa te inflation rates: namely, the internal (company) inflation rate and the external (general economy) inflation rate. It is assumed that the goods in the inventory deteriorate over time at a constant rate theta. The inventory policy is discussed over a finite time-horizon with sev eral reorder points. The results are discussed with a numerical exampl e and a sensitivity analysis of the optimal solution with respect to t he parameters of the system is carried out. Several particular cases o f the model are discussed in brief.