This paper investigates an optimal procurement policy for items with an inventory level-dependent demand rate and fixed lifetime. The demand rate is assumed to be a function of current inventory level and each unit has its fixed expiry date. So any units which remain unused by their expiry date are considered outdated, and must be disposed of. For the system presented, a mathematical model and solution methodology were developed. Sensitivity of the decision variables to changes in the parameter values is examined and future research needs are discussed in brief. (C) 2000 Elsevier Science B.V. All rights reserved.