Optimal Inventory Management Policy For Deterioration Items In The Process Of Production, Sale And Recycle

Deterioration goods are those goods that their value loses because of rot, decay,and decomposition etc during the process of storage. According to the statistics,20-40percent value of goods originated from the inventory cost. Therefore inventorydecision-making is crucial to the survival and development of an enterprise. If theinventory level is too high, the goods may be stored too long in the stock and the valueof them may sharply shrink. If the inventory level is too low, market opportunity may belost in all of a sudden and lead to potential business loss.Deterioration character can be classified into physical deterioration （tangibledeterioration） and intangible deterioration. Scholars often concern the physicaldeterioration but pay little attention to intangible deterioration. In fact, the economicglobalization, the rapid update pace of products and the personalized demand ofcustomer etc make intangible deterioration a very common phenomenon. What’s more,it is possible that the deterioration goods may be recyclable. Therefore, the research onthe inventory management of deterioration goods during the process of production, saleand recycling has considerable theoretical and economic significance.Firstly, as regard to the instable production process of deterioration products, thethesis first studies the economic production quantity （EPQ） strategy in an instableproduction system, in which market demand confronted with the enterprise is uncertain,the production facility may shift, the maintenance time is uncertain. The study isdivided into three aspects: the uncertainty of change in productivity, the uncertainoccurrence of fault in production line operations and the uncertainty of machinebreakdown. The fitness of the models is based on the condition that market demand isuncertain and is unknown in current period. The results of the study show that, even ininstable production environment, uncertain market demand and unknown demand incurrent period, enterprises can still schedule a proper production cycle （N）, productivity（P） and setup time （ε₁）, balancing the service level and the cost of the enterprise. Thefinding of the study reveals that, thefactor of setup time （ε₁） have many value; morepossibly,it is a scope with some extent stability.Then, the thesis makes discussion on the continuous deterioration process fromraw materials to finished goods and from manufacturing to selling. Comparativeresearch is conducted to study the contracts between the producer and the retailer in atwo-stage supply chain context in terms of continuous deterioration in the following aspects:（1） quantity discount contract;（2） price discount contract;（3） incentive andpenalty contract, and （4） buy-back contract in a stochastic demand condition. The studyindicates that, the performance of the supply chain can be more improved in stochasticdemand condition than in a certain one. And, in a stochastic demand environment, theimprovement result that the quantity discount contract, buy-back contract has on thesupply chain is not significant. Furthermore, in the certain demand condition, theproducer and the retailercan reach agreements with small space unless the retailer cangive back some profit with price discount contract.Lastly, as regard to products having intangible deterioration character, the thesisstudies the ordering and replenishment strategy in the process of their continuousrecycling. The inventory management idea of re-production, the Markov process andthe Vensim simulation in system dynamics have been applied. The research is extendedinto two models:（1） the "last in first out"（LIFO） inventory consumption model forbooks in library;（2） the "first in first out"（FIFO） inventory consumption model forprecious metal Catalyst in chemical industry. For the first model （books in library）, thisthesis gains the optimal solution between ordering quantity （Q/S） and loan cycle （Lr）,balancing cost and readers’ satisfaction. It is found that, the （s,Q） replenishment strategyis more superior to the （s,S） replenishment strategy, and that when the library sets theobservation inventory level （） for ordering, books available in library, on-the-waynew books, and shortage quantities should be calculated, and the books lent by readersshould be excluded. The second model takes the catalyst of precious metal （Palladium,Rhodium etc） in chemical industry as an example. Based on the aldehyde activation ofthe catalyst, this thesis studies the ordering strategy of deterioration products in thecondition of FIFO inventories’ natural decay. Optimal solutions are acquired concerningsafe inventory level, ordering quantity, time for new input and circulation in differentstrategies of （s,Q） and （s,S）. The results show that, the （s,Q） model can reach the sameeffect as （s,S） model does.However, the significance of the leadtime, the decay rate onthe cost is not consistent with other deterioration items, managers should consider suchdetails.The results of this thesis can provide enterprises with deterioration products withan operational framework for the overall managerial activities of enterprises in theirproduction, sale, and product recycling.