The Effect of Units Lost Due to Deterioration in Fuzzy Economic Order Quantity (FEOQ) Model

For several decades, the Economic Order Quantity (EOQ) model and its variations have received much attention from researchers. Recently, there has been an investigation into an EOQ model incorporating effect of units lost due to deterioration in infinite planning horizon with crisp decision environment. Accounting for holding and ordering cost, as has traditionally been the case of modeling inventory systems in fuzzy environment are investigated which are not precisely known and defined on a bounded interval of real numbers. The question is how reliable are the EOQ models when items stocked deteriorate one time. This paper introduces Fuzzy Economic Order Quantity (FEOQ) model in which it assumes that units lost due to deterioration is included in the objective function to properly model the problem in finite planning horizon. The numerical analysis shows that an appropriate fuzzy policy can benefit the retailer and that is significant, especially for deteriorating items is shown to be superior to that of crisp decision making. A computational algorithm using LINGO 13.0 and MATLAB (R2009a) software are developed to find the optimal solution. Sensitivity analysis of the optimal solution is also studied and managerial insights are drawn which shows the influence of key model parameters.