A Two-Warehouse Inventory Model for Deteriorating Items with Capacity Constraints and Back-Ordering Under Financial Considerations

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This paper investigated two warehouse inventory model for a single deteriorating items under the assumption of shortages and partial backlogging under payments delay and the effect of inflation and time value for money is also incorporated. Again, two warehouse capacity (owned and rented) have been considered over the finite horizon planning under which back-ordering is assumed. When the order quantity becomes higher than the storage capacity in own warehouse then the system involves two warehouse model. In this model, excess inventory are stored in rented warehouses which are assumed to charge higher unit holding costs than owned warehouses. Moreover, in rented warehouse item deteriorates with higher rates than in owned warehouse. At first own warehouse are filled out by its storage capacity and the rests are kept in rented warehouse. So, at first, the items in RW decreases due to demand and deterioration until it reaches to the level zero while on the other hand a portion on the inventory on OW is depleted due to deterioration only. Then, the inventory on OW decreases due to demand and deterioration until it reaches to the level zero. Finally, shortages start and backlogging rate is negative exponential of function waiting time. Here, the demand is used as exponential function of time and backlogging rate varies negative exponential function of waiting time. The total cost function is carried out under the effect of JIT setup cost. Two numerical examples are illustrated for the developed model and sensitivity analysis has been carried out to identify behaviour of model parameters.