The Influences of Inflation and Time-Value of Money on an EOQ Model for Both Ameliorating and Deteriorating Items with Partial Backlogging

Both amelioration and deterioration effects are seen simultaneously for the inventory system with the items such as broiler, duck, pig, etc. in the poultry farm, highbred fishes in pond. When these items are kept in the farm or in the sales counter, they will increase in value due to their growth, and decrease in value due to feeding expenses and/or diseases. This paper presents an inventory model for both ameliorating and deteriorating items, with constant demand, taking into account inflation and time-value of money. The economic order quantity is determined for minimizing the average total cost per unit time. In the present inventory model, six costs are considered: holding cost, deterioration cost, purchasing cost, amelioration cost, shortage cost, opportunity cost due to lost sales. An optimal production policy is analytically derived. The problem in the present inventory model cannot be directly solved in a closed form. Therefore, the Mathematica software, which can perform symbolic as well as numerical analysis, has been used to minimize the average total cost per unit time and to find the optimal order quantities. The influences of inflation and time-value of money on the inventory system are investigated with the help of some numerical examples.