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Analysis of production-inventory system for deteriorating items with demand disruption

We develop a production-inventory model for deteriorating items with demand disruption. This differs from the conventional inventory model which is affected only by either deterioration or disruption. In real-life production-inventory systems, deterioration of products and demand disruption are inevitable. The objective of this paper is to address these issues and to be able to derive the optimal production run time and replenishment policy for spot market purchases. We divide the problem into different scenarios according to disruption's time and magnitude. In each scenario the optimal production and inventory plans are provided so that the manufacturer can satisfy the new demand and decrease the loss. Then a numerical example is used to illustrate the model.