Optimal Control Policy of a Production and Inventory System for multi-product in Segmented Market

Abstract

In this paper, we use market segmentation approach in multi-product inventory - production system with deteriorating items. The objective is to make use of optimal control theory to solve the production inventory problem and develop an optimal production policy that maximize the total profit associated with inventory and production rate in segmented market. First, we consider a single production and inventory problem with multi-destination demand that vary from segment to segment. Further, we described a single source production multi destination inventory and demand problem under the assumption that firm may choose independently the inventory directed to each segment. This problem has been discussed using numerical example.

Keywords

• Market Segmentation, Production-Inventory System, Optimal Control Problem