An extension of inventory models with discretely variable holding costs

In a recent paper, Alfares [2007. Inventory model with stock-level dependent demand rate and variable holding cost. International Journal of Production Economics, 108 (1-2), 259-265] presented an inventory model with a stock-dependent demand rate and variable holding costs. The analysis imposed a terminal condition that the inventory level at the end of the order cycle drop to zero and utilized a cost-minimization objective. However, with a stock-dependent demand rate, this approach does not provide an optimal profit. Allowing ending inventory to be nonzero, a profit-maximization model and solution methodology are developed. Computational results indicate a substantial improvement in the solution realized by the proposed approach.