A production inventory model with deteriorating items and shortages

A continuous production control inventory model for deteriorating items with shortages is developed. A number of structural properties of the inventory system are studied analytically. The formulae for the optimal average system cost, stock level, backlog level and production cycle time are derived when the deterioration rate is very small. Numerical examples are taken to illustrate the procedure of finding the optimal total inventory cost, stock level, backlog level and production cycle time. Sensitivity analysis is carried out to demonstrate the effects of changing parameter values on the optimal solution of the system.