Single item optimal lot sizing under continuous unit cost decrease

An important characteristic of high-tech industries is decreasing component unit cost over time. In this paper, we develop an inventory model for products experiencing continuous decrease in unit cost. Unlike earlier models which were restricted to equal cycle times, we allow cycle times of varying length. We develop a fast algorithm for identifying an optimal or near-optimal solution to the model and test the performance of the algorithm. We illustrate the models with numerical examples.