A Dynamic EPQ Model for Time-Varying Demand Problem With Product Life Cycle

Abstract

The study explores a dynamic economic production quantity model whose demand function in consideration of market-trend issue to decide the optimal number of production cycles, the corresponding optimal production time points, and the best time to withdraw from the production line. The objective function of the total relevant costs considered in the model is formulated as a nonlinear programming problem, and a complete search procedure is developed to find the optimal solution of inventory cost. The characteristics of daily necessaries, technology products and fashion products are also analyzed to develop different strategies for the decision makers. The proposed model and algorithm not only provided the optimal solution of the production period and cycle time but also gave the suggestion of the best time to withdraw from the market. Moreover, in order to provide the managers with useful information of the impacts of inventory cost, Monte Carlo technique is used to simulate the stochastic demand. In considering of the stochastic demand, the situation of shortage will definitely happen without or insufficient safe stock. Finally, a numerical example and the corresponding sensitivity analyses are carried out to illustrate the features of our model by utilizing the search procedure developed in this study.

Keywords

• Inventory
• economic production quantity
• product life cycle
• time-varying demand