An Optimal Procurement Policy for Items with Varied Demand Rate and Fixed Life Time

Y. Duan and J. Huo (PRC)


Inventory, varied demand rate, fixed lifetime, procurement policy


In this paper, the problem to determine optimal ordering quantity and ordering cycle length for retailer who deal with fixed lifetime is studied. The demand rate of this item is deterministic but varied. If the inventory level is rela tively high, the demand rate is a constant. As the inven tory is declined to certain level, the demand rate will de pend on the current inventory level. If the inventory level is relatively low, the demand rate will be another constant which is less than that when the inventory level is relatively high. The mathematical model to maximize the retailer’s net profit is proposed, and analytically tractable solutions are obtained. At last, a numerical solution is presented to illustrate the effectiveness of proposed ordering policy.

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