Journal of Applied Mathematics
Volume 2013 (2013), Article ID 961258, 9 pages
http://dx.doi.org/10.1155/2013/961258
Research Article

Planning Horizon for Production Inventory Models with Production Rate Dependent on Demand and Inventory Level

Jennifer Lin,1 Henry C. J. Chao,2 and Peterson Julian2

1Department of Transportation Logistics & Marketing Management, Toko University, Chiayi 61363, Taiwan
2Department of Traffic Science, Central Police University, Taoyuan 33334, Taiwan

Received 3 December 2012; Revised 1 March 2013; Accepted 2 March 2013

Academic Editor: Ching-Jong Liao

Copyright © 2013 Jennifer Lin et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper discusses why the selection of a finite planning horizon is preferable to an infinite one for a replenishment policy of production inventory models. In a production inventory model, the production rate is dependent on both the demand rate and the inventory level. When there is an exponentially decreasing demand, the application of an infinite planning horizon model is not suitable. The emphasis of this paper is threefold. First, while pointing out questionable results from a previous study, we propose a corrected infinite planning horizon inventory model for the first replenishment cycle. Second, while investigating the optimal solution for the minimization problem, we found that the infinite planning horizon should not be applied when dealing with an exponentially decreasing demand. Third, we developed a new production inventory model under a finite planning horizon for practitioners. Numerical examples are provided to support our findings.