Abstract

This paper examined a model for deteriorating items that accounts for demand that is inventory level dependent, controllable deterioration, credit facility and shortages. The paper also derived and maximized the objective function to obtain the optimal inventory management strategies. Furthermore, we presented numerical illustrations. From the numerical examples it can be observed that optimal profit and optimal quantity are sensitive to the demand rate and reduced deterioration rate parameters. We found that as the demand for the product increases, the profit also increases. Also, as the reduced deterioration rate increases, the profit decreases, which is consistent with daily business practice.