A volume flexible deteriorating inventory model with price sensitive demand

Abstract

This paper deals with a single item deteriorating production inventory model with price sensitive demand. Items deteriorate at a constant rate. The rate of production is finite and controlled by modern technology, capital investment and number of labors. Demand is adjusted by flexibility of inventory level and this flexibility is introduced through the determination of optimal production stopping time, number of labors and unit selling price of the product. The total profit is determined by trading of selling price, production cost, deterioration cost and holding cost. The paper aims to maximize total profit per unit time in a production cycle. A real coded genetic algorithm is proposed to find out maximum total profit per unit time and to determine optimal production stopping time, number of labors and unit selling price of the product. Finally, a sensitivity analysis is performed to indicate the effects of the parameters on total profit, unit selling price, number of labors and optimal production stopping time.