An EMQ model with time-varying demand over the product life cycle

The Economic Manufacturing Quantity (EMQ) problems that appear in the literature assume that the demand rate is a constant and then attempt to find the optimal production cycle. The assumption may be appropriate for everyday commodities with a stable demand rate but it is not suitable for technology or fashion products because their demand rate is not constant in the product life cycle. The demand rate for such products life cycle will gradually increase over time, reach a peak, and then decline. Therefore, the optimal lengths of each planning production cycle would be not equal, which means that the traditional EMQ model is not applicable in such situations. For better cost management, an alternative EMQ model is thus proposed in this study. The proposed model uses the diffusion model proposed by Bass (1969) to predict product demand rates over product life cycles to minimize the related inventory cost based. In addition, this research also analyzes the effect of different demand characteristics upon planning product life cycles.