Continuous review inventory control in the presence of fuzzy costs

Abstract

This paper presents new models of continuous review inventory control with or without backorder in the presence of uncertainty. Fuzzy set concepts are used to treat imprecision regarding the costs of continuous review inventory control, while probability theory is used to treat uncertainty regarding customer demand. Fuzzy total annual cost functions, which involve fuzzy arithmetic operations, are defined using the function principle. The optimal order quantity and the optimal reorder point are found in such a way as to minimize the fuzzy costs. Furthermore, a decision support system has been developed, which can be used for efficient evaluation of continuous review inventory systems with both crisp and fuzzy costs, incorporating a simulation analysis tool. (C) 2007 Elsevier B.V. All rights reserved.