• DOI:10.1051/ro/2013058
• Corpus ID: 2397474

Production-inventory system with finite production rate, stock-dependent demand, and variable holding cost

@article{Alfares2014ProductioninventorySW,
  title={Production-inventory system with finite production rate, stock-dependent demand, and variable holding cost},
  author={Hesham K. Alfares},
  journal={RAIRO Oper. Res.},
  year={2014},
  volume={48},
  pages={135-150}
}

• H. Alfares
• Published 2014
• Business
• RAIRO Oper. Res.

In general, traditional production-inventory systems are based on a number of simplifying
– but somewhat unrealistic – assumptions, including constant demand rate, constant holding
cost, and instantaneous order replenishment. These assumptions have been individually
challenged in numerous variations of production-inventory models. Finite production rate
models, such as economic production quantity (EPQ) systems consider gradual order
replenishment. Stock-dependent demand models assume the demand rate to be an elastic
function of the inventory level. Variable holding cost models assume the holding cost per
unit per time period to be a function of the time spent in storage. In this paper, the
three simplifying assumptions are simultaneously relaxed in a new production-inventory
system with a finite production rate, stock-level dependent demand rate, and variable
holding cost. Mathematical models and optimum solution procedures, including nonlinear
programming, are presented for two functional forms of holding cost variability. The main
contribution of this paper is the formulation and solution of a new production-inventory
model that more closely represents real-world situations. The realistic assumptions and
efficient solution algorithms should make the model practical and useful for industrial
applications.