Fuzzy profit measures for a fuzzy economic order quantity model

Changing economic conditions make the selling price and demand quantity more and more uncertain in the market. The conventional inventory models determine the selling price and order quantity for a retailer's maximal profit with exactly known parameters. This paper develops a solution method to derive the fuzzy profit of the inventory model when the demand quantity and unit cost are fuzzy numbers. Since the parameters contained in the inventory model are fuzzy, the profit value calculated from the model should be fuzzy as well. Based on the extension principle, the fuzzy inventory problem is transformed into a pair of two-level mathematical programs to derive the upper bound and lower bound of the fuzzy profit at possibility level a. According to the duality theorem of geometric programming, the pair of two-level mathematical programs is transformed into a pair of conventional geometric programs to solve. By enumerating different a values, the upper bound and lower bound of the fuzzy profit are collected to approximate the membership function. Since the profit of the inventory problem is expressed by the membership function rather than by a crisp value, more information is provided for making decisions. (C) 2007 Elsevier Inc. All rights reserved.