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Applied Mathematical Modelling 33 (2009) 744759

www.elsevier.com/locate/apm

An inventory model for a deteriorating item with displayed

stock dependent demand under fuzzy ination and
time discounting over a random planning horizon
Arindam Roy a,*, Manas Kumar Maiti b, Samarjit Kar c, Manoranjan Maiti d
a

Department of Engineering Science, Haldia Institute of Technology, Haldia, Purba-Medinipur, WB 721 657, India
b
Department of Mathematics, Mahishadal Raj College, Mahishadal, Purba-Medinipur, WB 721 628, India
c
Department of Mathematics, National Institute of Technology, Durgapur, WB 713 209, India
d
Department of Mathematics and Computer Application, Guru Nanak Institute of Technology, Kolkata, WB 700 114, India
Received 19 December 2006; received in revised form 23 November 2007; accepted 5 December 2007
Available online 23 December 2007

Abstract
An inventory model for a deteriorating item (seasonal product) with linearly displayed stock dependent demand is
developed in imprecise environment (involving both fuzzy and random parameters) under ination and time value of
money. It is assumed that time horizon, i.e., period of business is random and follows exponential distribution with a
known mean. The resultant eect of ination and time value of money is assumed as fuzzy in nature. The particular case,
when resultant eect of ination and time value is crisp in nature, is also analyzed. A genetic algorithm (GA) is developed
with roulette wheel selection, arithmetic crossover, random mutation. For crisp ination eect, the total expected prot for
the planning horizon is maximized using the above GA to derive optimal inventory decision. On the other hand when inationary eect is fuzzy then the above expected prot is fuzzy in nature too. Since optimization of fuzzy objective is not well
dened, the optimistic/pessimistic return of the expected prot is obtained using possibility/necessity measure of fuzzy
event. Fuzzy simulation process is proposed to determine this optimistic/pessimistic return. Finally a fuzzy simulation
based GA is developed and is used to maximize the above optimistic/pessimistic return to get optimal decision. The models
are illustrated with some numerical examples and some sensitivity analyses have been presented.
2008 Elsevier Inc. All rights reserved.
Keywords: Time value of money; Stochastic planning horizon; Possibility; Necessity

1. Introduction
In the present competitive market, the inventory/stock is decoratively displayed through electronic media
to attract the customers and to push the sale. Levin et al. [1], Schary and Becker [2] and Wolfe [3] established
the impact of product availability for stimulating demand. Mandal and Phaujder [4,5], Datta and Pal [6] and
*

Corresponding author.
E-mail address: royarindamroy@yahoo.com (A. Roy).

0307-904X/$ - see front matter 2008 Elsevier Inc. All rights reserved.
doi:10.1016/j.apm.2007.12.015

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

745

others considered linear form of stock dependent demand, i.e., D c dq, where D, q represent demand and
stock level respectively, c, d are two constants, so chosen to t the demand function best, where as Giri et al.
[7], Mandal and Maiti [8], Maiti and Maiti [9] and others took the demand of the form D dqb , where d; b are
suitable constants.
Eect of ination and time value of money in inventory problems is well established. The initial attempt in
this direction was made by Buzacott [10]. He dealt with an EOQ model under ination subject to dierent
types of pricing policies. In the subsequent year, Bierman et al. [11] showed that the ination rate does not
aect the optimal order quantity perse; rather, the dierence between the ination rate and the discount rate
aects on it. Due to increasing complexities of the world economy, it is very dicult to estimate this dierence
precisely. So, for real life inventory problems it is better to estimate this dierence as a fuzzy quantity. Though
a considerable number of research work has been done in this area (cf. Misra [12], Padmanabhan and Vrat
[13], Hariga and Ben-Daya [14], Chen [15], Dey et al. [16], Moon and Lee [17], etc.), only few of them have
considered these as fuzzy quantities.
Classical inventory models are usually developed over innite planning horizon. According to Gurnani [18],
Chung and Kim [19], the assumption of an innite planning horizon is not realistic due to several reasons such
as variation of inventory costs, changes in product specications and designs, technological changes, etc.
Moreover, for seasonal products like fruits, vegetables, warm garments, etc., business period is not innite.
There are some models (cf. Datta and Pal (1992), Bhunia and Maiti [20], Mahapatra and Maiti [21], etc.)
in which time horizon has been considered as nite. For seasonal products, the planning horizon varies over
years and may be considered as random with a distribution. Moon and Yun [22] developed an EOQ model
with a random planning horizon. Recently Moon and Lee [17] presented an EOQ model under ination
and discounting with a random product life cycle. Till now, none has developed inventory models incorporating random planning horizon, stock dependent demand, imprecise eect due to ination and discounting.
When some inventory parameters are fuzzy in nature the resultant objective function also becomes fuzzy.
After the introduction of fuzzy set theory in 1965 by Zadeh, extensive research work has been done on defuzzication of fuzzy numbers. Among these techniques centroid method [23], weighted average method [24],
graded mean value method [25], nearest interval approximation method [26], graded mean integration value
[27], etc., have drawn more attention. All these techniques replace the fuzzy parameters by their nearest crisp
number/interval and the reduced crisp objective function is optimized. To deal with fuzzy objective function,
Liu and Iwamura [28] proposed a method where an optimistic return of the objective function is optimized.
They used possibility measure of fuzzy event to transform the fuzzy objective function to an equivalent crisp
objective and also proposes a fuzzy simulation method to determine the value of this crisp equivalent for complicated situations. Maiti and Maiti [9] extended this work where pessimistic return of the objective function is
optimized using necessity measure of fuzzy event and they used it to solve a two-warehouse fuzzy inventory
model.
In this paper, an inventory model for a deteriorating item is formulated with displayed stock dependent
demand over a planning horizon. It is assumed that the planning horizon is uncertain, random in nature
and follows exponential distribution with a known mean. Here the ination and time value of money are considered and the resultant eect of these two is taken into account. The problem has been solved with both crisp
and imprecise resultant eect. For crisp model expected prot is maximized using a GA with roulette wheel
selection, arithmetic crossover and random mutation. In the case of fuzzy model, the problem with fuzzy
objective function is converted to a chance constrained programming using possibility/necessity measure of
fuzzy event, where optimistic/pessimistic return of the objective function with some degree of optimism/pessimism is optimized. Following Liu and Iwamura [28], a fuzzy simulation process is proposed to maximize the
optimistic/pessimistic return and a fuzzy simulation based genetic algorithm with above mentioned GA operators is developed to solve the model. The models are illustrated with some numerical data. Some sensitivity
analyses on expected prot are presented.

2. Assumptions and notations

The mathematical model in this paper is developed on the basis of following assumptions and notations:

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A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

Assumptions:
1. Demand rate is assumed here to vary with the displayed inventory level. But this psychological inuence
must have an upper limit, i.e., above some level, demand will remain unchanged.
2. The time horizon (a random variable) is nite.
3. The time horizon fully accommodates rst N cycles and end during N 1th cycle.
4. Lead time is negligible.
5. Replenishment rate is innite but replenishment size is nite.
6. Shortages are not allowed.
Notations:
1. T = Duration of a complete cycle.
2. q(t) = On hand inventory of a cycle in time t, j  1T 6 t 6 jT j 1; 2; . . . ; N .
3. q0 = Inventory level above which demand becomes constant.
4. t1 = Time in the rst cycle when inventory level reaches q0 , i.e. qt1 q0 for 0 < t1 < T .
5. D(q) = The demand rate, where

a bq0 ; a; b P 0; qt P q0 during 0 6 t 6 t1 ;
Dq
a bqt; a; b P 0; 0 6 qt 6 q0 during t1 6 t 6 T :
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.

h = Constant deterioration rate on the on hand inventory at time t.

C1 = Holding cost per unit item per unit time.
C3 = Ordering cost per replenishment cycle.
s = Selling price of one unit.
c = Purchasing cost of one unit.
H = Total time horizon(a random variable) and h is real time horizon.
N = Number of fully accommodated cycles to be made during the real time horizon h and time horizon
ends during N 1th cycle.
Q = Total ordered quantity in a cycle.
i = Ination rate.
r = Discount rate.
R = r  i, may be crisp or fuzzy.
P(N, T) = Total prot after completing N fully accommodated cycles.
HCL = Holding cost in last cycle.
SRL = Sales revenue in last cycle.
s1 = Reduced selling price in last cycle.
E{TPL(T)} = Expected total prot from last cycle.
E(TP) = Expected total prot from the planning horizon.

3. Mathematical formulation
In the development of the model, we assume that there are N full cycles during the real time horizon h and
the planning horizon ends during N 1th cycle, i.e., within t NT and t N 1T . At the beginning of
every jth j 1; 2; . . . ; N 1 cycle, company purchases an amount Q units of the item and when inventory
level reaches zero, then again order for the next cycle is placed (cf. Figs. 1a, 1b). For the last cycle some
amount may be left after the end of planning horizon. This amount is sold at a reduced price in a lot.
3.1. Formulation for jth (1 6 j 6 N ) cycle
The dierential equations describing the inventory level qt in the interval j  1T 6 t 6 jT 1 6 j 6 N
are given by

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

747

Fig. 1a. Inventory levels at dierent situations for NT < h 6 NT t1 .

Fig. 1b. Inventory levels at dierent situations for NT t1 < h 6 N 1T .

dqt
a  bq0  hqt; j  1T 6 t 6 j  1T t1 ;
dt
dqt
a  bqt  hqt; j  1T t1 6 t 6 jT ;
dt

1
2

where a; b; h > 0 and 0 < t1 < T , subject to the conditions that,

qt Q at t j  1T ;

qt q0 at t j  1T t1

and

qt 0 at t jT :

The solutions of the dierential Eqs. (1) and (2) are given by
( abq 
 hfj1T t tg
0
1
e
; j  1T 6 t 6 j  1T t1
 h 0 q0 abq
h
qt
a
bhjT t
fe
 1g;
j  1T t1 6 t 6 jT
bh

So,
qfj  1T t1 g q0




1
q0 b h

log 1
gives; t1 T 
:
bh
a

So, order quantity in a cycle is given by



a bq0
a bq0 ht1
q0
e :
Q
h
h
Present value of holding cost of the inventory for the jth (1 6 j 6 N ) cycle is given by

748

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

HC j C 1

j1T t1

qteRt dt C 1

jT

qteRt dt
j1T t1

j1T



C 1 a bq0 Rt1
C1
a bq0
q0
e
eRt1  eht1 eRj1T
 1eRj1T 
R h
Rh
h

C 1 aeRjT
C1a
feRbhT t1  1g
feRjT  eRt1  eRj1T g:
b hR b h
Rb h

Present value of purchasing cost for the jth (1 6 j 6 N ) cycle is given by



 
a bq0
a bq0 ht1 Rj1T
q0
e e
:
PC j c 
h
h

Present value of ordering cost for the jth (1 6 j 6 N ) cycle is given by

C j3 C 3 eRj1T :

Present value of sales revenue for the jth (1 6 j 6 N ) cycle is given by

Z j1T t1
Z jT
SRj s
fa bq0 geRt dt s
fa bqtgeRt dt


j1T

j1T t1


a bq0 RjT
a Rj1T t1
Rj1T t1
RjT
fe
s
e
g fe
e
g
R
R

ab
feRjT  ebhT Rbht1  eRj1T g
s
b hR b h

ab
feRjT  eRt1  eRj1T g :

Rb h

So,
P N ; T

N
X

SRj 

j1

N
X

C j3 HCj PCj :

j1

Now,
N
X

eRj1T

j1

So,

1  eNRT
:
1  eRT

10

"



a bq0
sa
sab
sab
1  eRt1

eRt1  eRT 
R
R Rb h
b hR b h
#
"



1  eNRT
a bq0 Rt1
1
a bq0
RT
bhT Rbht1

C
e
q
fe
e
g

1


1
1  eRT
Rh
R h 0
h
a
a
Rt1
ht1
RT
bhT Rbht1
fe
 e g
e
g
fe
hR b h
Rb h
#b

NRT
NRT
1e
1e
 c  Q C 3
:
11
feRT  eRt1 g
1  eRT
1  eRT

P N ; T s

Here, we consider that the planning horizon H is a random variable and follows exponential distribution with
p.d.f. as
 kh
ke ; h P 0;
12
f h
0;
otherwise;
where h is real planning horizon.

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

749

Since the planning horizon H has a p.d.f. f(h), the present value of expected total prot from N complete
cycles is given by



1 Z N 1T
X
sa bq0
sa
sab
1  eRt1

eRt1  eRT
P N ; T  f hdh
EfP N ; T g
R
R
Rb

h
N 0 NT


sab
ekT  eRkT
febhT Rbht1  eRT g

1  eRT 1  eRkT
b hR b h


 Rt1
a bq0 Rt1
a bq0 fe
 eht1 g afeRT  ebhT Rbht1 g
e

 C1
 1  q0
Rh
h
R h
b hR b h

 
kT
RkT
a
e
e

feRT  eRt1 g 
1  eRT 1  eRkT
Rb h


ekT  eRkT
:
13
 c  Q C 3
1  eRT 1  eRkT
3.2. Formulation for last cycle
The dierential equations describing the inventory level qt in the interval NT < t are given by
dqt
a  bq0  hqt; NT 6 t 6 NT t1 ;
dt
dqt
a  bqt  hqt; NT t1 6 t;
dt

14
15

where a; b; h > 0, subject to the conditions that,

qNT Q

and

qt q0

at t NT t1 :

The solutions of the dierential Eqs. (14) and (15) are given by
8
n
o
<  abq0 Q abq0 ehNT t ; NT 6 t 6 NT t1 ;
h
h
qt
:  a fq a gebhNT t1 t ; NT t 6 t:
1
0
bh
bh

16

In the last cycle, we consider two cases depending upon the cycle length. Let h be the real value corresponding
to the random variable H.
3.2.1. Case-I NT < h 6 NT t1
Present value of holding cost of the inventory for the last cycle is given by
Z h
qteRt dt
HC L1 C 1
NT


C 1 a bq0 Rh
C1
a bq0 hNT
RNT

Q
g
fe  e
e  feRhh  eRhNT g
R h
Rh
h
Present value of purchasing cost = cQ  eRNT.
Present value of ordering cost = C3eNRT.
Present value of sales revenue is given by
Z h
sa bq0 RNT
fe
fa bq0 geRt dt
 eRh g:
SRL1 s
R
NT
3.2.2. Case-II NT t1 < h 6 N 1T
Present value of holding cost of the inventory for the last cycle is given by

17

18

750

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

HC L2 C 1

NT t1

qte

Rt

dt C 1

qteRt dt
NT t1

NT



C 1 a bq0 RNT t1
C1
a bq0
RNT

Q
e
g
fe
feRht1 RNT  eRNT g
R h
Rh
h


C1a
C1
a
Rh
RNT t1
q
fe
feRNT t1  ebhNT t1 Rbhh g:
e
g

R b h 0 b h
Rb h
19
Present value of purchasing cost = cQ  eRNT.
Present value of ordering cost = C3eNRT.
Present value of sales revenue is given by
Z NT t1
Z h
Rt
fa bq0 ge dt s
fa bqtgeRt dt
SRL2 s
NT t1

NT

sa bq0 RNT
sa
sab
fe
feRh  eRNT t1 g
 eRNT t1 g feRNT t1  eRh g

R
R
Rb h


sb
a

q0
feRNT t1  ebhNT t1 Rbhh g:
R b h
b h
So, expected holding cost for the last cycle is given by
1 Z N 1T
1 Z NT t1
1 Z
X
X
X
HC L  f hdh
HC L1  f hdh
N 0

NT

N 0

NT

NT

N 0

NT

N 0

N 1T

HC L2  f hdh:

21

NT t1

N 0

Expected sales revenue from the last cycle is given by

1 Z N 1T
1 Z NT t1
1 Z
X
X
X
SRL  f hdh
SRL1  f hdh
N 0

20

N 1T

SRL2  f hdh:

22

NT t1

Expected sales revenue due to the sale at a reduced price of the leftover, if any, during the last cycle is given by
1 Z N 1T
1 Z NT t1
1 Z N 1T
X
X
X
eRh qh  f hdh s1
eRh qh  f hdh s1
eRh qh  f hdh:
s1
N 0

NT

N 0

NT

N 0

NT t1

23
So, expected total prot from last cycle is given by
 Rkt1
 



sa bq0 c1 a bq0
k
e
1
1  ekt1
EfTP L T g

1  eRkT
R
Rh
R k 1  eRkT
 kt1

sa bq0 e
 ekT  eRkt1 eRt1 kT

1  eRkT
R
 RkT



sa
sab
C1a
k
e
 eRkt1

1  eRkT
R Rb h Rb h R k

 Rkt1


 Rkt1
Rt1 kT
e
e
sb
a
e
 eRt1 kT

1  eRkT
1  eRkT
R b h 0 b h


 bht1 RbhkT
ksb
a
e
 eRkt1
q0

1  eRkT
R b hR b h k
b h

  kt1



C1
a bq0
k
1  eRhkt1
e
1

R h
h
R h k 1  eRkT
1  eRkT

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759


  kt1

c1 a bq0 eRkt1  eRt1 kT
e
 ekT


1  eRkT
1  eRkT
Rh
  kt1


 Rkht1
C1
a bq0
e
 eRht1 kT
e
 ekT

Q

R h
1  eRkT
1  eRkT
h


 Rkt1
Rt1 kT
C1
a
e
e
q0

R b h
1  eRkT
b h
 bht1 RbhkT



k
e
 eRkt1
1  ekT

c

Q

3
1  eRkT
1  eRkT
R b h k

 Rkt1

 


s1 k
a bq0 e
1
s1 k
a bq0
1  eRkht1


h
h
1  eRkT
R k
1  eRkT
R h k

 RkT


s1 a
k
e
 eRkt1

1  eRkT
b h R k

 Rkt1

s1 k
a
e
 ebht1 RbhkT
q
:

R k b h 0 b h
1  eRkT

751

24

3.3. Total prot from the system

Now, total expected prot from the complete time horizon is given by
ETP EP N ; T EfTP L T g:
So




sa bq0
sa
sab
Rt1
1  e

eRt1  eRT
ETP
R
R Rb h


sab
ekT  eRkT
bhT Rbht1
RT
e g
fe

1  eRT 1  eRkT
b hR b h


 Rt1
a bq0 Rt1
a bq0 fe
 eht1 g afeRT  ebhT Rbht1 g
e

 C1
 1  q0
Rh
h
R h
b hR b h




kT
RkT
a
e

e
ekT  eRkT

c

Q

C
feRT  eRt1 g

3
1  eRT 1  eRkT
1  eRT 1  eRkT
Rb h

 RkT 1  

sa bq0
k
e
1  ekt1

RkT
R
R k 1  e
1  eRkT
 Rkt1
 



sa bq0 c1 a bq0
k
e
1
1  ekt1

1  eRkT
R
Rh
R k 1  eRkT
 kt1

sa bq0 e
 ekT  eRkt1 eRt1 kT

1  eRkT
R
 RkT
  Rkt1



sa
sab
C1a
k
e
 eRkt1
e
 eRt1 kT

1  eRkT
1  eRkT
R Rb h Rb h R k


 Rkt1
Rt1 kT
sb
a
e
e
q0

1  eRkT
R b h
b h


 bht1 RbhkT
ksb
a
e
 eRkt1
q0

1  eRkT
R b hR b h k
b h

  kt1



C1
a bq0
k
1  eRhkt1
e
1

Q
R h
h
R h k 1  eRkT
1  eRkT

752

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759


  kt1

c1 a bq0 eRkt1  eRt1 kT
e
 ekT


1  eRkT
1  eRkT
Rh
  kt1


 Rkht1
C1
a bq0
e
 eRht1 kT
e
 ekT
Q


R h
1  eRkT
1  eRkT
h


 Rkt1
Rt1 kT
C1
a
e
e
q0

R b h
1  eRkT
b h
 bht1 RbhkT

k
e
 eRkt1

1  eRkT
R b h k





kT
1e
s1 k
a bq0 eRkt1  1

 c  Q C 3
1  eRkT
h
R k
1  eRkT




 RkT

Rkht1
s1 k
a bq0 1  e
s1 a
k
e
 eRkt1

h
1  eRkT
1  eRkT
R h k
b h R k


 Rkt1
bht1 RbhkT
s1 k
a
e
e
:
q0

1  eRkT
R k b h
b h

25

3.4. Stochastic model (model-1)

When the resultant eect of ination and discounting (R) is crisp in nature, then our problem is to determine T to
Max ETP :

26

3.5. Fuzzy stochastic model (model-2)

In the real world, resultant eect of ination and time value of money (R) is imprecise, i.e. vaguely dened
e Then, due to this assumption, our objective funcin some situations. So we take R as fuzzy number, i.e. as R.
f
f one
tion E(TP) becomes E TP . Since optimization of a fuzzy objective is not well dened, so instead of E TP
can optimize its equivalent optimistic or pessimistic return of the objective as proposed by Maiti and Maiti [9].
Using this method the problem can be reduced to an equivalent crisp problem as discussed below.
e and B
e be two fuzzy subsets of real numbers R with membership functions l and l respectively, then
If A
eA
eB
taking degree of uncertainty as the semantics of fuzzy number, according to Liu and Iwamura [28], Dubois
Prade [29,30] and Zimmermann [31]:
e B
e supfminlA~ x; lB~ y; x; y 2 R; xHyg;
Pos AH

27

where the abbreviation Pos represent possibility and w is any one of the relations >, <, =, 6, P.
e B
e is a dual of possibility measure. The grade of necesOn the other hand necessity measure of an event AH
sity of an event is the grade of impossibility of the opposite event and is dened as
e B
e B;
e 1  Pos AH
e
Nes AH

28

e B
e B.
e represents complement of the event AH
e
where the abbreviation Nes represents necessity measure and AH
So for the fuzzy stochastic model one can maximize the crisp variable z such that necessity/possibility meaf > zg exceeds some predened level according to decision maker in pessimistic/optisure of the event fE TP
mistic sense. Accordingly the problem reduces to the following two models:
f , the problem
Model-2a: When decision maker prefers to optimize the optimistic equivalent of E TP
reduces to determine T to,
maximize

f P zg P a1
subject to posfE TP

29

A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

753

Model-2b: On the other hand when the decision maker desires to optimize the pessimistic equivalent of
f , the problem is reduced to determine T to,
E TP
maximize

f P zg P a2 ;
nesfE TP
f 6 zg < 1  a2 :
posfE TP

subject to
i:e:;

30

4. Solution methodology
To solve the stochastic model (model-1) GA is used. The basic technique to deal problems (29) or (30) is to
convert the possibility/necessity constraint to its deterministic equivalent. However, the procedure is usually
very hard and successful in some particular cases (cf. [9]). Following Liu and Iwamura [28], Maiti and Maiti
[9], here two simulation algorithms are proposed to determine z in (29) and (30) respectively for a feasible T.
Algorithm 1. Algorithm to determine a feasible T to evaluate z for the problem (29):
e which approximately minTo determine z for a feasible T, roughly nd a point R0 from fuzzy number R,
imizes z. Let this value be z0 and set z z0 (for simplicity one can take z0 0). Then R0 is randomly generated
e and let z0 value of ETP for R R0 and if z < z0 replace z with z0 . This step is repeated a
in a1 -cut set of R
nite number of times and nal value is taken as the value of z. This phenomenon is used to develop the
algorithm.
1.
2.
3.
4.
5.
6.
7.

Set z z0 .
e
Generate R0 uniformly from the a1 cut set of fuzzy number R.
Set z0 = value of ETP for R R0 .
If z < z0 then set z z0 .
Repeat steps 2, 3 and 4, N 1 times, where N 1 is a suciently large positive integer.
Return z.
End algorithm.

Algorithm 2. Algorithm to determine a feasible T to evaluate z for the problem (30):

f < zg 6 1  a2 . Now roughly nd a point R0 from fuzzy
f P zg P a2 ) posfE TP
We know that nesfE TP
e which approximately minimizes ETP . Let this value be z0 (for simplicity one can take z0 0 also)
number R,
f < zg 6 1  a2 then increase z with e. Again check
and e be a positive number. Set z z0  e and if posfE TP
f
f
posfE TP < zg 6 1  a2 and it continues until posfE TP < zg > 1  a2 . At this stage decrease value of e and
again try to improve z. When e becomes suciently small then we stop and nal value of z is taken as the value
of z. Using this criterion, required algorithm is developed as below. In the algorithm the variable F 0 is used to
store initial assumed value of z and F is used to store value of z in each iteration.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Set z z0  e, F z0  e, F 0 z0  e, tol 0:0001.

e
Generate R0 uniformly from the 1  a2 cut set of fuzzy number R.
Set z0 = value of ETP for R R0 .
If z0 < z.
then go to step 11.
End If
Repeat step-2 to step-6 N 2 times.
Set F z.
Set z z e.
Go to step-2.
If z F 0 // In this case optimum value of z < z0  e
Set z F 0  e, F F  e, F 0 F 0  e.

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A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

13.
14.
15.
16.
17.
18.
19.
20.
21.
22.

Go to step-2
End If
If e < tol
go to step-21
End If
e e=10
zF e
Go to step-2.
Output F.
End algorithm.

So for a feasible value of T, we determine z using the above algorithms and to optimize z we use GA. GA
used to solve model-1 is presented below. When fuzzy simulation algorithm is used to determine z in the algorithm, this GA is named as fuzzy simulation based genetic algorithm (FSGA). This is used to determine fuzzy
objective function values.
4.1. Genetic algorithm (GA)/fuzzy simulation based genetic algorithm (FSGA)
Genetic algorithm is a class of adaptive search technique based on the principle of population genetics. In
natural genesis. we know that chromosomes are the main carriers of the hereditary information from parents
to osprings and that genes, which carry hereditary factors, are lined up in chromosomes. At the time of
reproduction, crossover and mutation take place among the chromosomes of parents. In this way, hereditary
factors of parents are mixed up and carried over to their osprings. Darwinian principle states that only the
ttest animals can survive in nature. So a pair of ttest parents normally reproduce better ospring.
The above mentioned phenomenon is followed to create a genetic algorithm for an optimization problem. Here potential solution of the problem are analogous with the chromosomes and chromosome of better ospring with the better solution of the problem. Crossover and mutation are performed among a set of
potential solutions and a new set of solutions are obtained. It continues until terminating conditions are
encountered. Michalewicz [32] proposed a genetic algorithm named the contractive mapping genetic algorithm (CMGA) and proved the asymptotic convergence of the algorithm by the Banach xed-point theorem. In CMGA, movement from an old population to a new population takes place only when the average
tness of a new population is better than the old one. This algorithm is modied with the help of a fuzzy
simulation process to solve the fuzzy stochastic models of this paper. The algorithm is named FSGA and
this presented below. In the algorithm, pc ; pm are probabilities of the crossover and the probability of
mutation, respectively, I is the iteration counter, and P(I) is the population of potential solutions for iteration I. The (P(I)) function initializes the population P(I) at the time of initialization. The (P(I)) function
evaluates the tness of each member of P(I) and at this stage an objective function value due to each solution is evaluated via the fuzzy simulation process (using Algorithm 1 or Algorithm 2). In case of stochastic
model (model-1) objective function is evaluated directly without using simulation algorithms. So in that
case this GA is named ordinary GA. M is iteration counter in each generation to improve P(I) and M 0
is upper limit of M.
4.2. GA/FSGA algorithm
1. Set I 0, M 0, M 0 50.
2. Initialize pc ; pm .
3. Initialize (P(I)) and let N 0 be its size.
4. Evaluate (P(I)).
5. While M < M 0
6.
Select N 0 solutions from P(I) for mating pool using roulette-wheel selection process [32]. Let this set
be P 1 I.

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755

7.
Select solutions from P 1 I for crossover depending on pc .
8.
Perform crossover on selected solutions to obtain population P 1 I.
9.
Select solutions from P 1 I for mutation depending on pm .
10.
Perform mutation on selected solutions to obtain new population P(I + 1).
11.
Evaluate (P(I + 1)).
12.
Set M = M + 1.
13.
If average tness of P(I + 1) > average tness of P(I) then
14.
Set I = I + 1.
15.
Set M = 0.
16.
End If.
17. End While.
18. Output: Best solution of P(I).
19. End algorithm.

4.3. GA/FSGA procedures

(a) Representation: A n dimensional real vector X x1 ; x2 ; . . . ; xn is used to represent a solution, where
x1 ; x2 ; . . . ; xn represent n decision variables of the problem.
(b) Initialization: N 0 such solutions X 1 ; X 2 ; X 3 ; . . . ; X N 0 are randomly generated by random number generator. This solution set is taken as initial population P(1). Here we take N 0 50, pc 0:3, pm 0:2,
I 1. These parametric values are assumed as these give better convergence of the algorithm for the
model.
(c) Fitness value: Value of the objective function due to the solution X, is taken as tness of X. Let it be
f X . Objective function is evaluated via fuzzy simulation process (using Algorithm 1 or Algorithm
2) for Model-2.
(d) Selection process for mating pool: The following
are followed for this purpose
PNsteps
0
(i) Find total tness of the population F i1 f X i .
(ii) Calculate the probability of selection pi of each solution X i by the formula pi fP
X i =F .
(iii) Calculate the cumulative probability qi for each solution X i by the formula qi ij1 pj .
(iv) Generate a random number r from the range [0, 1].
(v) If r < q1 then select X 1 : Otherwise select X i 2 6 i 6 N , where qi1 6 r 6 qi .
(vi) Repeat step (iv) and (v) N 0 times to select N 0 solutions from old population. Clearly one solution
may be selected more than once.
(vii) Selected solution set is denoted by P 1 I in the proposed GA/FSGA algorithm.
(c) Crossover:
(i) Selection for crossover: For each solution of P(I) generate a random number r from the range [0, 1].
If r < pc then the solution is taken for crossover, where pc is the probability of crossover.
(ii) Crossover process: Crossover taken place on the selected solutions. For each pair of coupled solutions Y 1 ; Y 2 a random number c is generated from the range [0, 1] and their osprings Y 11 and
Y 21 are obtained by the formula:
Y 11 cY 1 1  cY 2 ; Y 21 cY 2 1  cY 1 :
(d) Mutation:
(i) Selection for mutation: For each solution of P(I) generate a random number r from the range [0, 1].
If r < pm then the solution is taken for mutation, where pm is the probability of mutation.
(ii) Mutation process: To mutate a solution X x1 ; x2 ; . . . ; xn select a random integer r in the
range [1, n]. Then replace xr by randomly generated value within the boundary of rth component
of X.

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A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

5. Numerical illustration
5.1. Stochastic model
To illustrate the models we consider the following numerical data.
C 3 $50;

c $5;

s $9;

C 1 $1:0;

a 180;

q0 100;

k 0:05;

s1 $4;

r 0:15;

i 0:05;
i.e. R 0:1 in appropriate units.
The optimal values of T along with maximum expected total prot have been calculated for dierent values
of h and b and the results are displayed in Table 1.
It is observed that for xed value of h, as b increases, expected prot increases. And for xed value of b, as h
(deterioration rate) increases, expected prot decreases. All these observations agree with the reality.
5.2. Fuzzy stochastic model
e ~r  ~i
Here, the resultant inationary eect is considered as a triangular fuzzy number i.e. R
0:11; 0:15; 0:19  0:04; 0:05; 0:06 0:05; 0:1; 0:15 and assume a1 0:9, a2 0:05, e 10 and all other
data remain same as in stochastic model. The maximum optimistic/pessimistic return from expression (29)
and (30) has been calculated for dierent h and b, and results are displayed in Table 2.
In this case also same trend of result as in the case of stochastic model is observed.

Table 1
Results for stochastic model
b

E(TP)

0.50
0.55
0.60
0.50
0.55
0.60
0.50
0.55
0.60

0.100
0.100
0.100
0.125
0.125
0.125
0.150
0.150
0.150

0.5887
0.6072
0.6229
0.5888
0.6034
0.6156
0.5824
0.5949
0.6061

6296.69
6364.63
6442.63
6128.27
6205.14
6289.79
5992.24
6073.87
6161.96

Table 2
Results for fuzzy stochastic model
b

Optimistic return a1 0:9

Pessimistic return a2 0:05

0.50
0.55
0.60
0.50
0.55
0.60
0.50
0.55
0.60

0.100
0.100
0.100
0.125
0.125
0.125
0.150
0.150
0.150

6621.77
6694.51
6777.61
6445.28
6527.22
6617.18
6302.54
6389.36
6482.83

6145.35
6211.06
6286.71
5980.66
6055.19
6137.41
5847.76
5927.00
6012.61

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757

Table 3
Sensitivity analysis with respect to present ination rate for stochastic model
R

Percentage
change in R

Percentage change in
R expected total prot
h 0:1 and b 0:50

Percentage change in
expected total prot
h 0:15 and b 0:5

Percentage change in
expected total prot
h 0:1 and b 0:6

Percentage change in
expected total prot
h 0:15 and b 0:6

0.06
0.07
0.08
0.09
0.10

40
30
20
10
00

0.11
0.12
0.13
0.14

+10
+20
+30
+40

+62.99
+41.08
+24.22
+10.86
0.0
(*6296.69)
08.99
16.56
23.02
28.60

+63.18
+41.21
+24.30
+10.89
0.0
(*5992.23)
09.02
16.61
23.09
28.69

+63.58
+41.43
+24.42
+10.94
0.0
(*6442.63)
09.05
16.67
23.16
28.77

+63.66
+41.49
+24.45
+10.95
0.0
(*6161.96)
09.06
16.69
23.20
28.81

Table 4
Sensitivity analysis with respect to the parameter k for stochastic model
k

Percentage
change in k

Percentage change in
expected total prot
h 0:1 and b 0:5

Percentage change in
expected total prot
h 0:15 and b 0:5

Percentage change in
expected total prot
h 0:1 and b 0:6

Percentage change in
expected total prot
h 0:15 and b 0:6

0.030
0.035
0.040
0.045
0.050

40
30
20
10
00

0.055
0.060
0.065
0.070

+10
+20
+30
+40

+19.22
+14.42
+09.60
+04.81
0.0
(*6296.69)
04.71
09.41
14.02
18.60

+19.53
+14.58
+09.69
+04.82
0.0
(*5992.23)
04.74
09.45
14.12
18.69

+19.42
+14.51
+09.61
+04.81
0.0
(*6442.63)
04.73
09.43
14.04
18.63

+19.57
+14.62
+09.73
+04.83
0.0
(*6161.96)
4.76
09.49
14.18
18.83

5.3. Sensitivity analysis

A sensitivity analysis is performed for stochastic model with respect to dierent resultant inationary eect
(R) for crisp ination and results are presented in Table 3. It is observed that as R increases, prot decreases
which agrees with reality.

Possibility Vs Profit
8500

Profit

8000
7500
7000
6500
6000
0.4

0.5

0.6

0.7

0.8

0.9

Possibility

Fig. 2. Possibility vs prot for b 0:5 and h 0:1.

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A. Roy et al. / Applied Mathematical Modelling 33 (2009) 744759

Necessity Vs Profit
6200
6150

Profit

6100
6050
6000
5950
5900
0.04

0.05

0.06

0.07

0.08

0.09

0.1

Necessity

Fig. 3. Necessity vs prot for b 0:5 and h 0:1.

A sensitivity analysis is performed for the maximum expected total prot with respect to the dierent values
of parameter k for stochastic model and presented in Table 4. It is observed that as k decreases, prot
increases. This happens because as k decreases, expected time horizon increases which increases the total
expected prot.
Results due to dierent values of condence levels a1 and a2 for Models-2a and 2b are calculated and plotted in Figs. 2 and 3. In both cases, as expected, prot decreases with the increase of condence levels.
6. Conclusion
Stock dependent inventory models are normally developed in a nite or innite time horizon. But for seasonal goods where time horizon is nite but imprecise in nature, it can be estimated as a fuzzy or stochastic
parameter. In this paper, for the rst time inventory model of a deteriorating item with displayed stock dependent demand has been considered under ination and time discounting over a stochastic time horizon. Again
ination and discount rate of money are also assumed as imprecise in nature. As a result we consider resultant
e A methodology is suggested for optieect of ination and time value of money (R) as a fuzzy parameter R.
mization of a fuzzy objective, where instead of the objective function, the optimistic/pessimistic return of the
objective is optimized. The methodology presented here is quite general and can be applied to the inventory
problems with dynamic demand, allowing shortages, etc.
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