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www.elsevier.com/locate/dsw
b,*
, Maw-Sheng Chern
a
Center of General Education, Hung Kuang Institute of Technology, Shalu 433, Taichung, Taiwan, ROC
Department of Marketing and Management Sciences, College of Business, The William Paterson University of New Jersey,
Wayne, NJ 07470-2103, USA
c
Department of Industrial Engineering and Engineering Management, National Tsing-Hua University, Hsinchu 30043,
Taiwan, ROC
Abstract
Barbosa and Friedman (L.C. Barbosa, M. Friedman, Management Science 24 (8) (1978) 819) establish an optimal
replenishment policy for power-form demand rate. In this paper, we extend their inventory lot-size model to allow
for shortages. The goal is to nd the optimal number and time of replenishments in order to keep the total relevant
cost as low as possible during a nite planning horizon. We develop a simple forward recursive algorithm to determine the optimal replenishment timing. Furthermore, we propose an intuitively accurate estimate for the optimal
number of replenishments, which signicantly reduces computational complexity in nding the optimal replenishment
number. A numerical example is provided to illustrate the solution procedure. 2002 Elsevier Science B.V. All
rights reserved.
Keywords: Inventory; Optimization; EOQ; Power-form demand; Shortages
1. Introduction
The classical economic order quantity (EOQ)
model is widely used principally because it is
simple to use and apply. However, a major problem in using the EOQ is that it assumes a constant
demand pattern. The deviations from the as-
*
Corresponding author. Tel.: +1-973-720-2651; fax: +1-973720-2809.
E-mail address: tengj@wpunj.edu (J.-T. Teng).
0377-2217/02/$ - see front matter 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 3 7 7 - 2 2 1 7 ( 0 1 ) 0 0 1 5 4 - 0
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
395
396
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
Ki ti ;
i 1; 2; . . . ; n:
dt
f t;
ti 6 t 6 si ;
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
397
n
X
Ii cs
i1
n
X
Si :
i0
and
si
1
V
ti1
ti ;
1V
1V
i 1; 2; . . . ; n:
10
a bsi
r1
1
r1
a bsi 1 ;
V
After applying (10) into (11), we obtain the following relation between ti 's:
a bti1 V a bti r1
i 1; 2; . . . ; n;
f1 V r2 a bti r1
and
r1
a bti V a bti 1
i 2; 3; . . . ; n;
i 1; 2; . . . ; n;
si
si ;
ti
f t dt;
i 1; 2; . . . ; n;
i 1; 2; . . . ; n;
12
r1
ti cs ti1
and
Z si
Z
V
f t dt
ti
g=V ;
and
which lead to
ch si
11
cs =ch cs 1=1 V K;
a bt2 V a bt1
1 V
r2
a bt1
r1
ar1 =V :
13
14
398
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
1 Vg1 r1
1 V
g2 1;
r2 r1
g1
a=a bt2
r1
=V ;
15
gi1 Vgi r1
1 V r2 gir1
gi Vgi 1 r1 =V ;
i 2; 3; . . . ; n:
Since tn1 H , we know from (14) that the optimal replenishment time fti g can be easily obtained
as follows:
ti gi =gn1 a bH
i 1; 2; . . . ; n:
17
a=b;
16
It is clear from (10) and (16) that the optimal solution fsi g and fti g not only exists but is also
unique (i.e., the optimal values of fsi g and fti g are
uniquely determined by Eqs. (10) and (16)). Consequently, it reduces the 2n-dimensional problem
of nding fsi g and fti g to a one-dimensional
problem. From (15), we only need to nd t2 to
generate gi ; i 1; 2; . . . ; n 1, uniquely by repeatedly using (15). For any chosen t2 , if
gn1 a bH =a bt2 , then t2 is chosen correctly. Otherwise, we can easily nd the optimal t2
by standard search techniques. We then apply (10)
to obtain fsi g. For any given value of n, the solution procedure for nding fti g is summarized in
the following algorithm.
Algorithm 1. For nding optimal replenishment
timing {ti }
Step 0. Choose two trial values of t2 , say
L 1 2V H =n1 V and U 21 2V H =
n1 V . Compute the corresponding values of
gn1 by using (15), say M and W , respectively.
Step 1. Let t2 L U LH M=W M,
and calculate the corresponding gn1 .
Step 2. If gn1 a bH =a bt2 is suciently small, then use (16) to nd fti g and stop.
Step 3. If gn1 a bH =a bt2 is signicantly larger than zero, then set U t2 , W gn1 ,
and go to Step 1. Otherwise, set L t2 ; M gn1 ,
and go to Step 1.
18
where
Z
QH
H
0
f t dt
a bH
r1
ar1 =br 1:
19
5. A numerical example
To illustrate the results, we apply the proposed
methods to solve the following numerical example.
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
399
Acknowledgements
Table 1
Optimal solution of Example 1
i
gi
ti
si
0
1
2
3
4
5
6
7
8
0.6648
1.0000
1.2564
1.4714
1.6601
1.8301
1.9861
2.1310
0.0826
0.2923
0.4528
0.5873
0.7053
0.8117
0.9093
1.0000
0.0000
0.2457
0.4171
0.5574
0.6791
0.7881
0.8876
0.9798
400
H.-L. Yang et al. / European Journal of Operational Research 137 (2002) 394400
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