A comprehensive analysis of linear and non-linear deterioration rates in dual-warehouse inventory systems

Abstract

This study presents an inventory system where items have an initial linear deterioration rate that transitions to a non-linear pattern, addressing a critical aspect of contemporary supply chain management. Our research introduces a dual warehouse inventory model comprising a rented facility and utilizing an owned warehouse. This unique approach is geared towards products experiencing a shift in deterioration rates, starting linearly and progressing non-linearly. The model operates under a constant demand rate, allowing for partial backlogging during shortages. Key to our analysis are distinct holding costs assigned to each warehouse, reflecting real-world scenarios. We derive conditions that minimize the total cost, supporting these with numerical examples spanning various parameter settings. A comprehensive sensitivity analysis evaluates the influence of each parameter’s alteration, keeping others constant. This analysis illuminates the model’s robustness and adaptability to different operational contexts. The findings offer significant managerial implications, providing valuable insights for effectively managing inventory in scenarios where product deterioration rates change over time. Our approach distinguishes itself by integrating linear and non-linear deterioration patterns within a dual warehouse system, a novel contribution to inventory management literature. The practical relevance of our model is underlined by its applicability in diverse supply chain environments, making it an essential tool for contemporary inventory management strategies.