Ordering policy for deteriorating items in a two-warehouse environment with partial backlogging

Abstract

In the present study, we consider the two-warehouse inventory problem for deteriorating items with constant demand rate. Shortages are allowed and partially backlogged. A rented warehouse (RW) is used to store the excess units over the fixed capacity of the own warehouse (OW). According to first-in-first-out (FIFO) policy, the items that are stored first are used first. FIFO policy yields fresh and good conditioned stock thereby resulting in customer satisfaction, especially when items are deteriorating in nature. However, usually the two warehousing systems assume that the holding cost of items is more in RW than the OW due to modern preserving facilities. Thus, to reduce the inventory costs, it is imperative to consume the goods of RW at the earliest time. This approach is termed as last-in-first-out (LIFO) approach. The objective of the present research is to extend a two-warehouse inventory model with FIFO and LIFO dispatching policies with partial