An economic production lot size model with increasing demand, shortages and partial backlogging

In this paper, an economic production quantity model is developed for a production–inventory system where the demand rate increases with time, the production rate is finite and adjustable in each cycle over an infinite planning horizon and shortages are permitted. The cost of adjusting the production rate depends linearly on the magnitude of the change in the production rate. During the stock‐out period, a known fraction of the unsatisfied demands is backordered while the remaining fraction is lost. The model is formulated taking the demand rate as a general increasing function of time and the optimal production policy is obtained for the special case of a linearly increasing demand rate. The proposed model is also shown to be suitable for a prescribed time horizon. A procedure to find approximately the minimum total cost of the system over a finite time horizon is suggested. A numerical example is taken to illustrate the solution procedure of the developed model.