Abstract:
In this paper we develop production inventory model where products were stored in the inventory suffered decay or deteriorate overtime with shortage allowed.
The rate of deterioration give an impact on the level of inventory that also has an
effect on the amount of unmet demand. Inventory levels and shortage rate are
calculated by the exponential distribution involving deterioration. Deterioration cost,
the cost of retained products, and the cost of shortages can be formulated so that the
total cost of the system be calculated. Then, the optimal inventory levels, the optimal backlog, the optimal cycle time are formulated by calculating the first derivative of the total cost function
