Effect of deteriorating items on the instantaneous replenishment model with backlogging

The physical characteristics of stocked items dictate the nature of inventory policies implemented to manage and control. Traditional economic order quantity models (EOQ) assume that items stocked preserve their characteristics while in inventory and some of them do not allow planned shortages. From this assumption arises the question of how reliable the EOQ models are when items stocked deteriorate over time. This paper introduces a modified EOQ model in which it is assumed that the stocked items are governed by a deterioration factor due to their nature and where the carrying cost is very expensive such that planned shortages may be advisable. A mathematical model is developed and a numerical example is provided to illustrate the solution procedure.