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http://dx.doi.org/10.7232/JKIIE.2014.40.3.313

Determination of Economic Inventory Quantity under Probabilistic Demands and Cancellation of Orders in Production System with Two Different Production Speeds  

Lim, Si Yeong (Department of Industrial and Management Engineering, Hanyang University)
Hur, Sun (Department of Industrial and Management Engineering, Hanyang University)
Park, You-Jin (School of Business Administration, Chung-Ang University)
Publication Information
Journal of Korean Institute of Industrial Engineers / v.40, no.3, 2014 , pp. 313-320 More about this Journal
Abstract
We consider the problem to find economic inventory quantity of a single commodity under stochastic demands and order cancellation. In contrast to the traditional economic production quantity (EPQ) model, we assume that once the amount of inventory reaches to a predetermined level of quantity then the production is not halted but its production speed decreases until the inventory level drops to zero. We establish two probabilistic models representing the behaviors of both the high-production period and low-production period, respectively, and derive the relationship between the level of inventory and costs of production, cancellation, and holding, from which the quantity of economic inventory is obtained.
Keywords
Inventory Modeling; Stochastic Demands; Order Cancellation; Economic Production Quantity;
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