Optimal ordering policy for deteriorating items with power-form stock dependent demand under two-warehouse storage facility

Abstract

In realistic world, there usually exist various factors that induce the retailer to order more items than the capacity of his Own-warehouse (OW). Therefore, for the retailer, it is very practical to determine whether or not to rent other warehouse and what order policy to adopt if other warehouse is indeed needed. For the stock dependent demand pattern, retailer has his own warehouse to display the items and may hire another warehouse of the larger capacity, treated as rented warehouse (RW) to storage the excess inventory. In this paper, an inventory model with power form stock-dependent demand rate is developed. The demand rate is assumed to be a polynomial form of current inventory level in Own-warehouse. It is also assumed that retailer first fulfills the demand (depending upon the stock displayed in the OW) directly from the RW until the inventory level in the RW reaches to the zero level, after that, demand is fulfilled from OW. As a consequence, no item is transferred from RW to OW, therefore no transfer cost (neither fixed nor variable) is considered between RW and OW. It is considered that the deterioration rate per unit items in the RW and OW are different due to different preservation environments, as a consequence the holding costs per unit item in RW and OW are also different. Proposed model is illustrated with some numerical example along with some sensitivity analysis of parameters.