A Two-warehouse Inventory Models For Value Deteriorating Items

In practice, the capacity of any warehouse is limited. However, there usually exist various factors that the decision-maker of the inventory system to order or product more items then can be held in his own warehouse. Therefore, for the decision maker, it is very practical to determine whether or not rent other warehouse. This is two-warehouse inventory model. Along with the development of economics, advancement of science, the products life cycle becoming shorter and shorter, it means that the research of value deterioration inventory model became important and significance. This paper studied two-warehouse inventory model with price discounts for bulk purchases and value deterioration items.First, this paper presented a review of the two-warehouse inventory management literature, and analyzed the character of value deterioration. We can divide our research into two parts. The first part studied two-warehouse inventory model with the stock-level-dependent demand and value deterioration. Here shortages are not allowed. A computational procedure is proposed to obtain the optimal replenishment quantity, the optimal replenishment cycle, which make the average total cost of the system to be minimum. Finally, some numerical examples for illustration are provided and sensitivity analysis on some parameters is made. The second part studied two-warehouse value deteriorating inventory model with time-varying demand. I extended this inventory problem into three different models: shortage are allowed or not allowed, unsatisfied demand can be backlogged, and inflationary effects are considered. A computational procedure is proposed to obtain the optimal replenishment quantity, the optimal replenishment cycle, which make the average total cost of the system to be minimum. The study shows that compare with the total backlogging, partial backlogging two-warehouse inventory model is less expensive and optimal replenishment cycle is longer. The study also shows that the two-warehouse inventory model has lower average total cost and optimal replenishment cycle is longer. Some numerical examples for illustration are provided and sensitivity analysis on some parameters is made.