Synchronized Production Policies for Deteriorating Items in a Declining Market

Abstract This paper considers a production-inventory system for a line of product in which the items are deteriorating at a constant rate, the demand rate decreases negative exponentially, and no shortages are allowed. We consider a finite planning horizon, and assume that the replenishments will occur through internal production at fixed intervals of time, but that flexible rates of production are available for each period. Mathematical models are developed to yield the optimal information on the production runs under various explicit time and cost implications of in-house production. Computational results are provided, and comparison of policies made with respect to the instantaneous replenishment situation. The model has important ramifications for just-in-time policies, flexible manufacturing environments, and make-buy strategic decisions.

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