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An inventory model involving back-order price discount when the amount received is uncertain

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  • Nughthoh Arfawi Kurdhi
  • Joko Prasetyo
  • Sri Sulistijowati Handajani

Abstract

This paper presents and analyses the continuous review inventory model with order quantity, safety factor, back-order price discount, ordering cost and lead time as decision variables. Our work is based on the paper of Huang (2010). We extend the model to incorporate the situation when the amount received is uncertain. The lead time demand is assumed follows a normal distribution. A solution procedure is developed to find the optimal solution. A numerical example is given to illustrate the model. A sensitivity analysis is also included to describe the effects of changes in the model parameters on the expected annual cost.

Suggested Citation

  • Nughthoh Arfawi Kurdhi & Joko Prasetyo & Sri Sulistijowati Handajani, 2016. "An inventory model involving back-order price discount when the amount received is uncertain," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(3), pages 662-671, February.
    • Handle: RePEc:taf:tsysxx:v:47:y:2016:i:3:p:662-671
    DOI: 10.1080/00207721.2014.900136
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    References listed on IDEAS

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    1. Kun-Shan Wu & I-Chuan Lin, 2004. "Extend (r, Q) Inventory Model Under Lead Time and Ordering Cost Reductions When the Receiving Quantity is Different from the Ordered Quantity," Quality & Quantity: International Journal of Methodology, Springer, vol. 38(6), pages 771-786, December.
    2. Ouyang, Liang-Yuh & Wu, Kun-Shan & Ho, Chia-Huei, 2004. "Integrated vendor-buyer cooperative models with stochastic demand in controllable lead time," International Journal of Production Economics, Elsevier, vol. 92(3), pages 255-266, December.
    3. Vijayan, T. & Kumaran, M., 2008. "Inventory models with a mixture of backorders and lost sales under fuzzy cost," European Journal of Operational Research, Elsevier, vol. 189(1), pages 105-119, August.
    4. Evan L. Porteus, 1985. "Investing in Reduced Setups in the EOQ Model," Management Science, INFORMS, vol. 31(8), pages 998-1010, August.
    5. Abuo-El-Ata, M. O. & Fergany, Hala A. & El-Wakeel, Mona F., 2003. "Probabilistic multi-item inventory model with varying order cost under two restrictions: A geometric programming approach," International Journal of Production Economics, Elsevier, vol. 83(3), pages 223-231, March.
    6. Taleizadeh, Ata Allah & Mohammadi, Babak & Cárdenas-Barrón, Leopoldo Eduardo & Samimi, Hadi, 2013. "An EOQ model for perishable product with special sale and shortage," International Journal of Production Economics, Elsevier, vol. 145(1), pages 318-338.
    7. Evan L. Porteus, 1986. "Investing in new parameter values in the discounted EOQ model," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 33(1), pages 39-48, February.
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    Cited by:

    1. S. Hemapriya & R. Uthayakumar, 2017. "An inventory model with uncertain demand and lost sales reduction under service level constraint," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(2), pages 1399-1418, November.

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