Wasting the Percentage of On-hand Inventory in an Instantaneous Economic Order Quantity Model Due to Deterioration

In this paper the traditional instantaneous economic order quantity model is extended to allow the percentage of on-hand inventory is wasted due to deterioration. That is, the wasted/ no wasted percentage of on-hand inventories in instantaneous EOQ models due to deterioration are considered simultaneously. For any given number of replenishment cycles the existence of a unique optimal replenishment schedule is proved and further the concavity of the total profit function of the inventory system in the number of replenishments is established. A new mathematical model is developed and considered as an enhancement to the EOQ model so that the net profit is maximized and the numerical analysis show that an appropriate policy can benefit the retailer and that policy is important, especially for wasting of deteriorating items. Finally, sensitivity analysis of the optimal solution with respect to the major parameter, percentage of on-hand inventory which is lost due to deterioration is also carried out.