Optimization in an instantaneous economic order quantity (EOQ) model incorporated with promotional effort cost, variable ordering cost and units lost due to deterioration

This paper investigates the instantaneous economic order quantity model by allocating the percentage of units lost due to deterioration in an on-hand inventory by framing promotional effort cost and variable ordering cost. The objective is to maximize the net profit so as to determine the order quantity, promotional effort factor, the cycle length and number of units lost due to deterioration. For any given number of replenishment cycles the existence of a unique optimal replenishment schedule are proved and mathematical model is developed to find some important characteristics for the concavity of the net profit function. Numerical examples are provided to illustrate the results of proposed model, which benefit the retailer and this policy is important, especially for wasting of deteriorating items. Finally, sensitivity analyses of the optimal solution with respect to the major parameters are carried out.