CHAPTER 3

DETERIORATING INVENTORY MODEL FOR TWO

PARAMETER WEIBULL DEMAND WITH SHORTAGES

3.1 Introduction

Inventory models for deteriorating products with shortages which were

completely backlogged have been proposed and analyzed in the past. Models where
shortages were allowed and completely backlogged, were presented by (Niketa J
Mehta and Nita H.Shah (2003), Nita H.Shah and Ankit S.Acharya (2008),
Biswaranjan Mandal (2010), Sanjay Jain and Mukesh Kumar (2010),Tripathy C.K.
and Mishra, U. (2010), Anikumar Sharma, ManojKumar Sharma et al (2012)).
Niketa J.Mehta and Nita H.Shah (2003) derived an inventory model with the effects
of inflation and time-value money along with an exponentially increasing demand
and constant deterioration rate. Nita H.Shah and Ankit S .Acharya (2008) solved
analytically an inventory model where the demand rate was exponentially
decreasing and deterioration rate follows two-parameter Weibull distribution.
Biswaranjan Mandal (2010) explained the capability of the Weibull distribution and
formulated the model in which ramp type demand rate was followed. Sanjay Jain
and Mukesh Kumar (2010) compares the work done by various researchers. This
model started with shortage with ramp type demand and three-parameter Weibull
distribution. Tripathy C.K. and Misha U. (2010) developed a model in which a finite
production rate is proportional to the demand rate whereas the demand rate follows
three-parameter Weibull distribution. Recently, Anil Kumar Sharma, Manoj Kumar
Sharma and Nish Ramani (2012) proposed a deterministic inventory model for two-
parameter Weibull distribution deterioration with power pattern demand and time
dependent holding cost. The objective of this chapter is to fill the gap. In the present
chapter, we propose to consider a model in which demand rate follows two-

21
parameter Weibull distribution and deterioration rate follows two-parameter
exponential distribution. Shortages are allowed which are completely backlogged.

The organization of the chapter is as follows. In section 3.2, we provide the

basic assumptions and notations. In section 3.3 the procedure for obtaining the
minimum total cost by undertaking an inventory model is discussed. A numerical
study is provided in section 3.4.

3.2 Assumptions and Notations

The following are the assumptions and notations applied in the proposed
model.

The inventory system involves only one item.

Lead time is zero.

The demand rate of any time is t( 1)

two parameter Weibull

distribution, where 0 1, 0 are called scale and shape parameter

respectively.

1
(t ) is the deterioration rate which follows the two parameter

(t )
1
exponential distribution f (t; , ) = e , t and t 0,

where is the location parameter, and 0 is scale parameter.

Shortages are allowed and are completely backlogged.

A is setup cost per order

C1 is deterioration cost per unit time

C 2 is shortages cost per unit time

I (t ) is Inventory level at time t

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 Q is the initial inventory level

T is the duration of a cycle

T1 is the time at which the inventory level reaches zero

K (T ) is the total cost per unit time

T 1* ,Q*and K(T 1* ) are the optimal values of length of time, order

quantity and total average inventory cost respectively.

3.3 Mathematical Model

The initial inventory level of the inventory system is assumed to be Q.

Either by demand or by deterioration the inventory level becomes zero when t = T 1.
Shortage are completely backlogged. The differential equation for the instantaneous
state over (0,T) are given by

Fig. 3.3.1 Graphical representation of inventory system

dI (t ) 1 1
+ I(t) = t , 0 t T1 (3.3.1)
dt

dI (t ) 1
= t , T1 t T (3.3.2)
dt

with boundary conditions I (T1 ) = 0 and I (0) Q

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 The solution of equations (3.3.1) and (3.3.2) with boundary conditions

I (T1 ) = 0 and I (0) = Q is

1
T1 t T1 t 1 T1 2 t 2
I (t ) ( + + 2 )–
( 1) 2 ( 2)

1 1
T1 t t tT1 t 2 tT1 2 t 3
( + + )+
( 1) 2 2( 2)

T1 t 2 t 2
t 2T1 1
t 3
t 2T1 2 t 4

2
( + + ), 0 t T1 (3.3.3)
2 ( 1) 2 2( 2)

I(t) = (T1 t ), T1 t T1 (3.3.4)

The initial order Quantity at t = 0 is

T1 T1( 1)
T1 2
Q= ( 2
) (3.3.5)
( 1) 2( 2)

Therefore the total cost consist of the following four components,

DC,SHC,HC and SC

Deteriorating Cost per unit time

T1
C
DC = 1 [ Q D(t )dt ]
T 0

C1T1( 1) T1( 2)
C1
= + 2
(3.3.6)
T ( 1) 2T ( 2)

Shortage Cost per unit time

C2 T
SHC = [ (T1 t )dt]
T T1

C2 T1( 1)
C2 T
= + - C2T1 (3.3.7)
T 1

24
 Inventory Holding Cost per unit time

T
h 1
HC = I (t )dt
T0

T1 1
h T1 t T1 t 1 T1 2 t 2
= [ ( + + 2 )–
T 0
( 1) 2 ( 2)

1 1
T1 t t tT1 t 2 tT1 2 t 3
( + + )+
( 1) 2 2( 2)

T1 t 2 t 2
t 2T1 1
t 3
t 2T1 2 t 4

2
( + + )] dt
2 ( 1) 2 2( 2)

1
hT1 hT1 2 hT1 3
= + + -
T( 1) 2 T( 2 ) 6 2T ( 3)

4 5
hT1 hT1
3
+ 4
(3.3.8)
12 T ( 4) 12 T ( 5)

Setup cost per unit time

A
SC = (3.3.9)
T

Using Equations (3.3.6), (3.3.7), (3.3.8) and (3.3.9), we can get the average
total cost per unit time K (T1 ) as

1
K ( T1 ) = {Setup cost + Deterioration cost+ Holding Cost+ Shortages Cost}
T

25
 A hT1 1 hT1 2 hT1 3 hT1 4
K ( T1 ) = + + + 2
- 3
+
T T ( 1) 2 T ( 2) 6 T ( 3) 12 T ( 4)

5 1
hT1 C2 T1 T C2
4
+ + - T1 C 2 +
12 T ( 5) T 1

C1T1( 1) T( 2)
C1
+ 1 2
(3.3.10)
T ( 1) 2T ( 2)

Now our objective is to minimize the total average cost per unit time
K (T1 ) . The necessary and sufficient conditions for total cost K (T1 ) to be minimum
2
K (T1 ) K (T1 )
are K (T1 ) is = 0 and >0
T1 T12

Therefore, the first-order differential equation of K (T1 ) with respect to T1 is

as follows

1 1
K (T1 ) C1T1 C T1 C2 ( 1)T1
Now = + 1 + -
T1 T 2T 2 T

1 2
1 h T1 h T1 h T1
C 2T1 + + + -
T 2 T 6 2T

h T1 3 h T1 4
+ =0 (3.3.11)
12T 3 12T 4

The second- order differential equation of K (T1 ) , with respect to T1 is as

follows.

2 2 1 2 1
K (T1 ) C1 T1 C1 ( 1)T1 C2 ( 1)T1
= + + -
T12 T 2T 2
T

2 1 2
2 h T1 h ( 1)T1 h ( 2)T1
( 1)C2T1 + + + 2
-
T 2T 6T

2
h ( 3)T1
>0 (3.3.12)
12T 3

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 The solution of the equation (3.3.11) for T1 , we obtain the optimal value of
2
k (T1 )
T1 (say T1* ) and satisfies the condition
T12

The optimal Economic order quantity Q * is then obtained from

equation (3.3.5) by substituting the value T1 T1* .

Q* = (T1* T ) (3.3.13)

The minimum total cost K ( T1* ) is then obtain from equation (3.3.10) by
*
substituting the value T1 T1 .

3.4 A Numerical Illustration

Considering an inventory system with following parameter in proper unit

A = 250, T =1, h = 5, = 0.9, = 2, = 0.1, C1 = 0.02, C2 = 5, we get T1* = 0.1735

and K (T1* ) = 251.2844 and Q * = 0.0788.

From the above said parameter values, we obtain the numerical values of
K (T1* ) for various values of T1 . It can be noted that there exists an optimal values of

T1 to minimize K (T1* ) .

Table 3.4.1 Optimal results for different values of T1*

*
T1 K (T1* )
0.15 251.2873
1.16 251.2854

0.17 * 251.2844 *
0.18 251.2846
1.19 251.263

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 251.2875
251.287
251.2865
251.286
TC

251.2855
251.285
251.2845
251.284
0.15 0.16 0.17 0.18 0.19 0.2
T1

Fig. 3.4.1 Graphical representation of total cost (TC) vs time T1

From the following tables we obtain the effect of changes in the valuse of
the system parameters ,h,C1,C2on the optimal cost and number of order by
varying one parameter while keeping other parameters as constant.

Table 3.4.2 Variation in scale parameter ( )

T1
*
K (T1* ) Q*
0.5 0.1735 250.8027 0.0701
0.6 0.1735 250.9632 0.0701
0.7 0.1735 251.1237 0.0701
0.8 0.1735 251.2843 0.0701
0.9 0.1735 251.4448 0.0701
1.0 0.1735 251.6054 0.0701
1.1 0.1735 251.7659 0.0701

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 Fig. 3.4.2 Graphical representation of total cost (TC) vs scale parameter ( )

Effects of various parameter with the increase of scale parameter ( ) are

given below

(a) The inventory period remains constant

(b) Initial inventory level remains constant

(c) Total average cost of the system increases.

Table 3.4.3 Variation in shape parameter ( )

T1
*
K (T1* ) Q*
1.7 0.1791 251.3840 0.1231
1.8 0.1772 251.3509 0.1024
1.9 0.1754 251.3175 0.0849
2.0 0.1735 251.2843 0.0701
2.1 0.1717 251.2514 0.0577
2.2 0.1698 251.2192 0.0473
2.3 0.1680 251.1878 0.0387

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Fig. 3.4.3 Graphical representation of total cost (TC) vs shape parameter ( )

Effects of various parameter with the increase of shape parameter ( ) are

given below

(a) The inventory period decreases

(b) Initial inventory level decreases

(c) Total average cost of the system decreases.

Table 3.4.4 Variation in holding cost parameter (h)

h T1
*
K (T1* ) Q*
5.3 0.1706 251.2859 0.0667
5.2 0.1715 251.2854 0.0677
5.1 0.1725 251.2849 0.0689
5.0 0.1735 251.2843 0.0701
4.9 0.1745 251.2837 0.0712
4.8 0.1755 251.2831 0.0724
4.7 0.1766 251.2825 0.0738

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Fig. 3.4.4 Graphical representation of total cost (TC) vs holding cost parameter

Effects of various parameter with the increase of holding cost parameter

( h ) are given below

(a) The inventory period increases

(b) Initial inventory level increases

(c) Total average cost of the system decreases.

Table 3.4.5 Variation in deterioration rate cost parameter ( C1 )

C1 T1
*
K (T1* ) Q*
0.01 0.1742 251.2838 0.0709
0.02 0.1735 251.2843 0.0701
0.03 0.1728 251.2847 0.692
0.04 0.1721 251.2852 0.0684
0.05 0.1714 251.2856 0.0676
0.06 0.1708 251.2861 0.0669
0.07 0.1701 251.2865 0.0661

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Fig. 3.4.5 Graphical representation of total cost (TC) vs deterioration cost
parameter ( C1 )

Effects of various parameter with the increase of deterioration rate cost

parameter ( C1 ) are given below

(a) The inventory period decreases

(b) Initial inventory level decreases

(c) Total average cost of the system increases

Table 3.4.6 Variation in shortage cost parameter (C2 )

C2 T1
*
K (T1* ) Q*
4.4 0.1669 251.1335 0.0690
4.6 0.1692 251.1838 0.0718
4.8 0.1714 251.2341 0.0747
5.0 0.1735 251.2843 0.0774
5.2 0.1755 251..3344 0.0815
5.4 0.1774 251.3846 0.0841
5.6 0.1793 251.4346 0.0854

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Fig. 3.4.6 Graphical representation of total cost (TC) vs shortage cost
parameter ( C 2 )

Effects of various parameter with the increase of shortage cost parameter

( C 2 ) are given below

(a) The inventory period increases

(b) Initial inventory level increases

(c) Total average cost of the system increases.

Table 3.4.7 Variation in deterioration rate parameter ( )

T1
*
K (T1* ) Q*
0.06 0.1359 251.4616 0.0630
0.07 0.1476 251.4565 0.0690
0.08 0.1575 251.2967 0.0733
0.09 0.1661 251.2873 0.0765
0.1 0.1735 251.2843 0.0788
0.2 0.2106 251.2687 0.0790

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Fig. 3.4.7 Graphical representation of total cost (TC) vs deterioration rate
parameter ( )

Effects of various parameter with the increase of deterioration rate

parameter ( ) are given below

(a) The inventory period increases

(b) Initial inventory level increase

(c) Total average cost of the system decreases.

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