An inventory model for perishable items with stock and advertisement sensitive demand

Abstract

This paper deals with an inventory model in which the demand rate is a function of both the stock level and the effort expended on advertising the product. The expenditure on advertising is considered to be a quadratic function of the effort of the salesmen. The deterioration of items is assumed to be constant. The decision variables are the initial replenishment lot size level and the investment in advertising for increasing sales effort in order to maximize profit. The paper extends an inventory model over finite and infinite time horizons. The associated profit maximization problem is solved by the ‘Euler–Lagrangian method’. The model is illustrated with the help of a numerical example.

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