Optimal inventory and pricing policy for items with weibull deterioration

Abstract

This study addresses the production quantity problem in which the price and the lot size are considered simultaneously for an item with a varying rate of deterioration. The Weibull distribution is used to represent the distribution of the time to deterioration. It is assumed that the demand of the product is a function of the price of product. Both EOQ and EPQ models are considered and for the case of EPQ, the effects of two issuing policies, LIFO and FIFO, are investigated on the profit. For each case, an approximate total profit function is developed in a power series of a which is exactly up to the first two terms. Due to the complexity of the objective functions developed, pattern search method is employed to find the optimal values of the decision variables.