Optimal replenishment schedule considering time value for logistic demand

In recent years, due to the rapid advancement of technologies, more and more innovative products and skid products are introduced to the markets. As the life cycles of such products are shorter than those of durable goods, the effectiveness of their inventory management is therefore more critical to their competitiveness. Traditional inventory planning models and techniques mostly deal with products with long product life cycle. The assumption on the demand pattern and subsequent solution approaches are generally not suitable for dealing with products with short product life cycle. It is observed that in consequence of the imitation effect, the number of buyers is influenced by each other; the dynamic of the demand can thus be modelled with the logistic substitution model typically used for modelling imitation effects. In this research, one-inventory replenishment problems based on the logistic demand model are formulated and solved to facilitate the management of products with short product life cycle. The volatile of the financial market in recent years demands us to have a more accurate characterization of the cost based on its time-adjusted value. An inventory model allowing shortages and shortages followed by inventory replenishment policy is established for the logistic substitution model with consideration of both time-value of money and inflation. An extended Wagner-Whitin approach is used to determine the replenishment cycle, schedules and lot-sizes. A sensitivity analysis is performed to compare the policies with and without shortages.