Inventory models with joint effects of inflation and deterioration

Abstract

This study is to investigate the influence of inflation as a parameter of the inventory system on the decision variables for the items which are subject to exponential decay. Deterministic inventory models are developed for two cases in which price increase is anticipated, and continuous inflation effect exists. For the latter case, the concept of the time value of money is introduced under the varying rates of inflation and approximated analytical formulas for optimal order intervals are derived under several pricing policies. Some numerical examples are given to illustrate solutions for each of cases.