OPTIMAL INVENTORY MANAGEMENT STRATEGY FOR DETERIORATING ITEMS

This paper studied the problem of profit maximization for deteriorating item model where demand function is stock level dependent, deterioration is controllable, vendor can offer trade credit and shortages are completely backlogged. We derived the objective function which is the total average profit function and solved the profit maximization problem by using MatLab. From the numerical illustrations and sensitivity analysis, we found that the optimal total average profit and the optimal ordered quantity are sensitive to the reduced deteriorating rate and initial demand parameters.