Economic order quantity models for continuously deteriorating products using linear and exponential penalty costs

The authors present EOQ models for perishable products which consider continuous deterioration of the utility of a product and introduce an exponential penalty cost function as a measurement of the utility deterioration. The approach proposed is simple and can be used to obtain easily the closed forms of the economic order quantities, which have not previously been derived. These forms describe the effect of the penalty cost clearly and are a natural extension of economic order quantities for non-perishable products. The present results are shown to be consistent with reported EOQ models with exponential decay but derived more elaborately. The approach has the added advantage that it can be easily extended to the economic lot scheduling problem for multi-item perishable products.