An inventory model of production-inventory policy for food products considering quality loss in raw materials

The majority research on inventory model for deteriorating items in multi-echelon system assumes that a physical depletion of some inventories occurred over time. It means that the inventory is depleted not only due to the demand but also due to some deteriorated items. In food products, however, during a certain period, its quantity remains the same while its quality does degrade over time. Therefore, this study is aimed at developing a more representative inventory model for mimicking food deterioration characteristics. A mathematical model is established to represent the integrated inventory policy of procurement-production-delivery in which the total profit of the whole system is the objective function. The length of the production cycle, the frequency of raw material procurement and finished goods deliveries over the production cycle are the controlling variables. The numerical test indicates that the proposed model yields to a better profit compared to the benchmark model.