International Journal of Modern Mathematical Sciences, 2017, 15(2): 237-247 International Journal of Modern Mathematical Sciences Journal homepage: www.ModernScientificPress.com/Journals/ijmms.aspx ISSN: 2166-286X Florida, USA Article Optimal Ordering and Transfer Policy for an Inventory with Non-Increasing Time –Dependent Demand R.P.Tripathi1,* and Manjit Kaur 2 1 Department of Mathematics, Graphic Era University, Dehradun (UK), India 2 Department of Mathematics, Banasthali Vidhiyapeeth, Rajasthan India *Author to whom correspondence should be addressed; E-Mail: [email protected] Article history: Received 27 December 2016; Revised 15 May 2017; Accepted 30 May 2017; Published 1 June 2017. Abstract: This paper develops optimal ordering and transfer policy for an inventory with non-increasing dependent demand from the warehouse to the display area. Mathematical model is developed for finding optimal order quantity, cycle time and total profit. The main aim is to find maximum the average profit per unit time provided by the retailer. Moreover, a numerical example is provided to illustrate the proposed model. Next, sensitivity analysis with respect to different parameters is established to demonstrate the model developed. Mathematica 5.1 software is used to find numerical result. Keywords: Non-decreasing demand; inventory; transfer; deterioration; warehouse Mathematics Subject Classification 2010: 90B05 1. Introduction In the traditional inventory model, demand rate is considered to be either constant or timedependent. In real life demand rate is not always constant, particularly in case of seasonal products, the demand rate is time-dependent. Several research papers have been published considering timedependent demand. Silver & Meal [1] presented an EOQ (Economic Order Quantity) for the case of a varying demand. Linearly time-dependent demand was established by Donaldon [2]. Khanna et al. [3] Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 238 developed an EOQ (Economic Order Quantity) model for deteriorating item having time dependent demand when delay is payment is permissible. Teng et al. [4] presented EOQ model under trade credit financing with increasing demand. Khanra et al. [5] established an EOQ model for a deteriorating items having time dependent demand when delay in payment is permissible. Jalan and Chaudhuri [6] established EOQ model for exponentially demand pattern. Large numbers of researchers like Mitra et al. [7], Silver [8], Tripathi & Pandey [9], Singh et al. [10], Khanna and Chaudhuri. [11], Ghosh and Chaudhuri [12] presented their research work considering time- dependent demand. Commonly, at most all items deteriorate over time. Therefore, the effect of deterioration cannot be ignored in the study of inventory problems. Ghare & Schrader [13] developed an EOQ model for exponential deterioration rate. Chung et al. [14] established a new economic production quantity. (EPQ) inventory model for deteriorating items under two levels of trade credits, in the supplier offers to the retailer. A permissible delay period and simultaneously the retailer in terms provide a maximal trade credit period to its customer in a supply chain system comprised of three stages. The valuable work is this direction came from researchers like, Giri et al. [15], Jalan et al. [16], Gowsami & Chaudhuri [17], Chung & Ting [18], Lin et al.[19], Wee [20],Yhmadi et al. [21] , Modarres & Taimury [22] , Rabbani & Manavizadeh [23],Tripathi & Uniyal [24], in this direction etc. During the last few decades, the study of transfer policy, the integration of production and inventory model as well as the development of inventory policy have been considered by large several researchers. For instance Goyal &Chang [25] dealt with an ordering transfer inventory model to determine the retailer' optimal order quantity and the number of transfer per order from the warehouse to the display area. Goyal [26] initially developed a single supplier-single retailer integrated inventory model. Banerjee [27] presented a joint economic lot-size model and assumed that the supplier followed a lot for shipment policy with respect to a retailer. Goyal [28], extended model [27] and discussed a model that customers number for equal-sized shipments, but the production of model had to be finished before the shipments could start. Yang & Wee [29] presented an integrated multi-lot-size production inventory model for deteriorating items. Yao et al. [30] established a model that explains how important supply chain parameters affect the cost saving to be realized from collaborative initiatives such as vender-managed inventory. The objective of this paper is to find the ordering and transfer schedule which maximize the profit per unit time. In this case the amount of display space is limited. Then the cost of inventory inside the shop may be greater than the back room. In this paper, we develop an inventory model in which, the demand rate is linearly time-dependent. The rest of the paper organized as follows. In section 2, we provide assumption and notation for the proposed model. In section 3 a mathematical model is developed to obtain maximum profit. Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 239 Optimal solutions are discussed in section 4. In section 5, numerical example is given. The sensitivity analysis of the optimal solution with respect to parameters of the system is carried out in section 6. Finally, conclusions are discussed in the last section. 2. Assumption and Notations 2.1. Assumptions (i).The lead time between the retailer and the supplier is negligible (ii).The time to transfer items from the warehouse to the display area is negligible (iii).The shortage are not allowed (iv).The credit-transfer policy is adopted. (v).Demand rate is linearly time dependent i.e. D = D(t) = a-bt, a > 0, 0 ≤ b ≤ 1 2.2. Notations h1 &h : unit carrying cost per item in the warehouse &display area respectively. n : integer number of transfers from the warehouse to the display area. p& c : unit selling price& purchase cost of the product / unit respectively. s : fixed cost per transfer from the warehouse to the display area. S : cost of placing order. : deterioration rate. t1&T : replenishment cycle time in the display area& warehouse respectively. q : quantity per transfer from the warehouse to the display area. Q : order quantity placed on the supplier. I(t) : inventory level at time t in the display area. TP : total profit per cycle time R : the inventory level at t = t1 AP : average total profit per cycle time AP* : optimal average total profit per cycle time D = D (t): the demand rate at time t. we assume that the demand rate D = D(t) is a function of the stock on the display I (t). Demand rate is D = D (t) = a-bt, a > 0, 0 ≤ b ≤ 1 3. Mathematical Formulation According to assumption the following two cases may arise to form the mathematical model: (i)The total cost per unit cycle in the warehouse Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 240 The retailer stocks Q items per order in the warehouse provided by the supplier. The inventory level in the warehouse falls to zero after the quantity q per transfer is transferred from the warehouse to the display area. We obtain Q = nq. The total cost during [0, T] in the warehouse containing: (a) The cost of placing order = S and n(n 1) (b) The cost of stock holding is h1 q t1 . 2 (ii) The total cost per unit cycle in the display area Initially at time t = 0, the inventory level I(t) reaches the maximum due to the commodities are transferred from the warehouse in the display area. The inventory level decreases gradually to R at the end of the cycle. The differential equation involving the inventory level at time t can be written as follows: dI (t ) I (t ) (a bt ), a 0, 0 t 1, 0 t t1 dt (1) The solution of the above differential equation along with the boundary condition I( t1 ) = R b a b I (t ) Re (t1 t ) 2 e (t1 t ) 1 t1 e (t1 t ) t (2) The total cost during [0, t1 ] consist of cost of placing orders = S and the cost of stock holding is bt 2 1 1 b b 1 b h I (t )dt h (e t1 1) R a t1 a t1 1 2 0 t1 (3) The Sales revenue per cycle is t1 t1 bt ( p c) DI (t )dt ( p c) (a bt )dt ( p c)t1 a 1 2 0 0 (4) Using equation (2) and I (0) = q + R, we get t1 q (e 1 b bt e 1) R a 1 t1 (5) t1 The second approximation is used for exponential term that is e ( t1 )2 . 1 t1 2 b bt12 1 b t q t1 1 1 R a t1 bt1 2 2 (6) n(n 1) Then, the cost of stock holding in the warehouse is h1 q t1 2 t n(n 1) t1 1 b bt1e 1 n(n 1) h1 q t1 h1 (e 1) R a t 1 2 2 Copyright © 2017 by Modern Scientific Press Company, Florida, USA (7) Int. J. Modern Math. Sci.2017, 15(2): 237-247 241 From the above result, the total profit (TP) during [0, T] is given by TP ( t1 ) = Revenue – total cost in the warehouse-total cost in the display area bt a b n(n 1) t1 n( p c)t1 a 1 S h1 (e 1) R 2 2 2 t bt1e 1 t 1 bt 2 1 1 b b 1 b ns nh (e t1 1) R a t1 a t1 1 2 S ns nhat1 2 t1 1 h bn(n 1)t e 1 2 (8) nhbt12 nhbt1e t1 1 b h n(n 1)t1 nh (e t1 1) R a 1 2 2 2 bt n( p c)t1 a 1 2 (9) The average profit per unit time is AP ( t1 ) = TP T , where T= n t1 S s ha hbt1 hbe t1 1 b h (n 1) h 2 (e t1 1) R a 1 nt1 t1 2 2 t1 h1b(n 1)t1e t1 bt ( p c) a 1 2 2 (10) 4. Determination of Optimal Solution Taking the first and second partial derivative of equation (10) with respect to t1, we obtain of AP (n, R, t1 ) with respect to t1 . dAP (t1 ) h (n 1) S s hb hbe t1 1 b 2 2 R a e t1 1 dt1 2 2 nt1 t1 t1 1 b he t1 1 1 b h b( p c) h1b(n 1)e R a R a 2 2 t1 t1 t1 2 (1 t1 ) d 2 AP (t1 ) h (n 1) he t1 2S 2s 1 b 3 3 hbe t1 R a 2 e t1 1 2 2 t1 dt1 nt1 t1 1 t1 he t1 t12 t 2 2h h1b(n 1)e 1 (2 t1 ) 0. t1 t13 2 (11) (12) 2 Since d AP 2(t1 ) < 0, it means that total profit is concave function of t1 .The optimal solution is dt1 obtained by following dAP (t1 ) =0. dt1 Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 The second approximation is used for exponential term e t1 1 t1 242 in equation (11) i.e. ( t1 )2 , providedӨt <1. 1 2 1 b 2S 2n s hbnt12 2hbn t13 hbn 2t14 R a h1n(n 1) 2t12 h1n(n 1) 3t13 0.5h1 n(n 1) 4 t14 2nh( t1 1) 2nh t1 ( t1 1) nh 2 t12 ( t1 1) 2nh h1n(n 1)bt12 (1 t1 ) h1 n(n 1)b t13 (1 t1 ) h1n(n 1)b 2 t14 (1 t1 ) ( p c)bn t12 0 . 2 The second order approximation is used of exponential term i.e. e t1 1 t1 (13) ( t1 )2 , to find 2 closed form solution provided Өt1<1.The closed form solution is not valid for Өt1>1 . 2 2 2 AP ( t1 ) S s ha hbt1 hb2 hbt1 R 1 a b h1 (n 1) t1 h1 (n 1) t1 h h t1 nt1 t1 2 2 2 4 2 h1b(n 1)t1 h1b(n 1)t12 h1b (n 1)t13 bt ( p c) a 1 2 2 4 2 (14) Note: The second order approximation of exponential terms are valid if Өt1<1 etc, only. 5. Numerical Examples and Sensitivity Analysis Let a =100units/unit time, b= 0.2 units/ unit time, n=2, h = $10/unit/unit time, h1 =$0.3/unit/unit time, S=20, s = 20, p=$3per unit, c = $1/ unit, = 0.05. Let T = n t1 and Q = nq and obtained the numerical result as shown in tables 1 to 4. To study the effect of changes is the system of key parameters t1 , T, h, h1 , q, , on the optimal average total profit AP*. Sensitivity analysis has been performed by changing the parameters , n=2,3,4,5,6,7,8,9 , h=10,11,12,1314,15,16 , h1 = 0.3,0.4,0.5, 0.6,0.7,0.8,0.9 =0.05,0.10, 0.15, 0.20, 0.25, 0.30, 0.35 ,S = 20, 40, 60, 80, 100, 130, 170, 200, 250, 300 , s = 20, 25, 30, 55,70, 80, 90,100, and changing one parameter at a time, keeping the remaining parameter at their original values. The results are shown in the following table. Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 243 Table 1.Variation of number of transfers from the warehouse n n t1 2 3 4 5 6 7 8 9 0.228826 0.212746 0.203183 0.196426 0.191161 0.186800 0.183040 0.179707 T = n t1 0.457652 0.638238 0.812732 0.98213 1.146966 1.307600 1.464320 1.617363 q 23.4685 21.8109 20.8258 20.1299 19.5879 19.1391 18.7521 18.4092 Q=nq 46.937 65.4327 83.3032 100.6495 117.5274 133.9737 150.0168 165.6828 AP* 22268.9 22274.7 22277.0 22277.8 22277.9 22277.6 22277.1 22276.3 Table 2. Variation of unit carrying cost in display area h h 10 11 12 13 14 15 16 t1 0.228826 0.218523 0.209499 0.201510 0.194372 0.187943 0.182113 T=n t1 0.457652 0.437046 0.418998 0.40302 0.388744 0.375886 0.364226 q 23.4685 22.4063 21.4764 20.6535 19.9185 19.2567 18.6568 Q=nq AP* 46.937 44.8126 42.9528 41.307 39.837 38.5134 37.3136 22268.9 24262.7 26256.8 28251.1 30245.7 32240.4 34235.3 Table 3. Variation of parameter unit carrying cost per item in the warehouse h1 h1 0.3 0.4 0.5 0.6 0.7 0.8 0.9 t1 0.228826 0.227729 0.226648 0.225583 0.224532 0.223496 0.222474 T=n t1 0.457652 0.455458 0.453296 0.451166 0.449064 0.446992 0.444948 q 23.4685 23.3554 23.2439 23.1341 23.0257 22.9189 22.8136 Q=nq 46.937 46.7108 46.4878 46.2682 46.0514 45.8378 45.6272 AP* 22268.9 22268.3 22267.6 22267.0 22266.4 22265.8 22265.2 Table 4. Variation of deterioration rate 0.05 0.10 0.15 0.20 0.25 0.30 0.35 t1 0.228826 0.217968 0.208451 0.200021 0.192487 0.185702 0.179550 T=n t1 0.457652 0.435936 0.416902 0.400042 0.384974 0.3714040 0.359100 q 23.4685 25.555 26.9532 28.1509 29.2485 30.2818 31.2675 Q=nq 46.937 51.11 53.9064 56.3018 58.497 60.5636 62.535 AP* 22268.9 11262.4 7589.42 5750.02 4644.14 3905.12 3375.77 Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 244 Table 5. Variation of the cost of placing order S S 20 40 60 80 100 130 170 200 250 300 t1 0.228826 0.264004 0.294949 0.322886 0.348545 0.383758 0.426097 0.455205 0.499855 0.540715 T=n t1 0.457652 0.528008 0.589898 0.645772 0.69709 0.767516 0.852194 0.91041 0.99971 1.08143 q 23.4685 27.0991 30.2978 33.1896 35.849 39.5038 43.9063 46.9381 51.5907 55.8685 Q=nq 46.937 54.1982 60.5956 66.3792 71.698 79.0076 87.8126 93.8762 103.1814 111.737 AP* 22268.9 22248.5 22230.0 22214.2 22199.2 22178.6 22153.7 22136.5 22110.1 22085.8 Table 6. Variation of the fixed cost per transfer from the warehouse to the display area s s t1 20 25 30 40 55 70 80 90 100 0.228826 0.247053 0.264004 0.294949 0.335965 0.372400 0.394781 0.415928 0.436022 T=n t1 0.457652 0.494106 0.528008 0.589898 0.671930 0.74480 0.789562 0.831856 0.872044 q 23.4685 24.3489 27.0991 30.2978 34.5448 38.3243 40.6492 42.8481 44.9396 Q=nq 46.937 48.6978 54.1982 60.5956 69.0896 76.6486 81.2984 85.6962 89.8792 AP* 22268.9 22258.3 22248.5 22230.5 22206.6 22185.2 22172.1 22159.7 22147.8 All the above observation mentioned in table 1-6 can be summed up as follows: From Table 1, it can easily see that increase of n results, increase in order quantity Q and average total profit AP. That is, change in n causes positive change in both Q and AP. From Table 2, we see that increase of h, results decrease in order quantity Q and average total profit AP. That is, change in h causes negative change in both Q and AP. From Table 3, we see that increase of h1 result slight decrease in order quantity Q and Average total profit AP. That is change in h1 leads slight negative change in both Q and AP. From Table 4, we can easily seen that increase of deterioration rate cause increase in order quantity Q and decrease in average total profit AP. That is change in will leads positive change in Q and negative change in AP. From Table 5, we see that increase of S, results increase of order quantity Q and decrease in average total profit AP. That is, change in S will leads positive change in Q and negative change in AP. Copyright © 2017 by Modern Scientific Press Company, Florida, USA Int. J. Modern Math. Sci.2017, 15(2): 237-247 245 From Table 6, we see that, increase of s result increase in order quantity Q, and decrease in average total profit AP. That is, change in s, leads positive in Q and negative change in AP. 6. Conclusion In this paper, we have developed optimal ordering and transfer policy for an inventory with linearly time dependent demand for deteriorating items. The mathematical formulation has been developed for (i). The total cost per unit cycle in the warehouse.(ii). The total cost per unit cycle in the display area. The optimal shows that the average total profit is concave function of t1 . From sensitivity analysis the following observation is obtained. The change in n result positive change in Q and AP. The change in h result negative change in Q and AP. The change in h1 result slight negative change in Q and AP. The change in deterioration rate result positive change in Q and negative change in AP. The change in S results positive change in Q and negative change in AP. The paper may be extended for several ways. For instance, we may extend for nondeteriorating items. We may also modify the paper by extending the two parameter Weibull distribution deterioration. 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