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Determining optimal lot size for a two-warehouse system with deterioration and shortages using net present value

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  • Hsieh, Tsu-Pang
  • Dye, Chung-Yuan
  • Ouyang, Liang-Yuh

Abstract

In this paper, we develop a deterministic inventory model for deteriorating items with two warehouses by minimizing the net present value of the total cost. Deterioration rates of items in the two warehouses may be different. In addition, we allow for shortages and complete backlogging. We then prove that the optimal replenishment policy not only exists but also is unique under some condition. Further, the result reveals that the reorder interval based on the average total cost, if it exists, must be longer than that derived using net present value. Finally, we use Yang's [H.L. Yang, European Journal of Operational Research 157 (2004) 344-356] numerical example to illustrate the model and conclude the paper with suggestions for possible future research.

Suggested Citation

  • Hsieh, Tsu-Pang & Dye, Chung-Yuan & Ouyang, Liang-Yuh, 2008. "Determining optimal lot size for a two-warehouse system with deterioration and shortages using net present value," European Journal of Operational Research, Elsevier, vol. 191(1), pages 182-192, November.
    • Handle: RePEc:eee:ejores:v:191:y:2008:i:1:p:182-192
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    References listed on IDEAS

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    Cited by:

    1. Bhunia, A.K. & Shaikh, Ali Akbar, 2015. "An application of PSO in a two-warehouse inventory model for deteriorating item under permissible delay in payment with different inventory policies," Applied Mathematics and Computation, Elsevier, vol. 256(C), pages 831-850.
    2. Asoke Kumar Bhunia & Ali Akbar Shaikh, 2016. "Investigation of two-warehouse inventory problems in interval environment under inflation via particle swarm optimization," Mathematical and Computer Modelling of Dynamical Systems, Taylor & Francis Journals, vol. 22(2), pages 160-179, March.
    3. Bakker, Monique & Riezebos, Jan & Teunter, Ruud H., 2012. "Review of inventory systems with deterioration since 2001," European Journal of Operational Research, Elsevier, vol. 221(2), pages 275-284.
    4. M. Palanivel & R. Uthayakumar, 2016. "Two-warehouse inventory model for non-instantaneous deteriorating items with partial backlogging and inflation over a finite time horizon," OPSEARCH, Springer;Operational Research Society of India, vol. 53(2), pages 278-302, June.
    5. Chandra K. Jaggi & Mamta Gupta & Amrina Kausar & Sunil Tiwari, 2019. "Inventory and credit decisions for deteriorating items with displayed stock dependent demand in two-echelon supply chain using Stackelberg and Nash equilibrium solution," Annals of Operations Research, Springer, vol. 274(1), pages 309-329, March.
    6. J. Viswanath & R. Thilagavathi, 2024. "A study of two warehouse inventory dynamism for non-instantaneous deteriorating item with Weibull demand considering trade credit policy," OPSEARCH, Springer;Operational Research Society of India, vol. 61(4), pages 1906-1926, December.
    7. Alamri, Adel A. & Syntetos, Aris A., 2018. "Beyond LIFO and FIFO: Exploring an Allocation-In-Fraction-Out (AIFO) policy in a two-warehouse inventory model," International Journal of Production Economics, Elsevier, vol. 206(C), pages 33-45.
    8. A.K. Bhunia & A.A. Shaikh & R.K. Gupta, 2015. "A study on two-warehouse partially backlogged deteriorating inventory models under inflation via particle swarm optimisation," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(6), pages 1036-1050, April.
    9. Chandra K. Jaggi & Sunil Tiwari & Satish K. Goel, 2017. "Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities," Annals of Operations Research, Springer, vol. 248(1), pages 253-280, January.
    10. Ghiami, Yousef & Beullens, Patrick, 2016. "Planning for shortages? Net Present Value analysis for a deteriorating item with partial backlogging," International Journal of Production Economics, Elsevier, vol. 178(C), pages 1-11.
    11. Manish Shukla & Sanjay Jharkharia, 2014. "An inventory model for continuously deteriorating agri-fresh produce: an artificial immune system-based solution approach," International Journal of Integrated Supply Management, Inderscience Enterprises Ltd, vol. 9(1/2), pages 110-135.
    12. NwaJesus Anthony Onyekuru & Robert Marchant & Julia M. Touza & Chukwuma Ume & Chinedu Chiemela & Chukwemeka Onyia & Eric C. Eboh & Christopher C. Eze, 2024. "A–Z of cost-effective adaptation strategies to the impact of climate change among crop farmers in West Africa," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(8), pages 20311-20332, August.
    13. Tiwari, Sunil & Jaggi, Chandra K. & Gupta, Mamta & Cárdenas-Barrón, Leopoldo Eduardo, 2018. "Optimal pricing and lot-sizing policy for supply chain system with deteriorating items under limited storage capacity," International Journal of Production Economics, Elsevier, vol. 200(C), pages 278-290.
    14. Wutthisirisart, Phichet & Sir, Mustafa Y. & Noble, James S., 2015. "The two-warehouse material location selection problem," International Journal of Production Economics, Elsevier, vol. 170(PC), pages 780-789.
    15. Bhunia, A.K. & Jaggi, Chandra K. & Sharma, Anuj & Sharma, Ritu, 2014. "A two-warehouse inventory model for deteriorating items under permissible delay in payment with partial backlogging," Applied Mathematics and Computation, Elsevier, vol. 232(C), pages 1125-1137.
    16. Ghiami, Yousef, 2023. "An analysis on production and inventory models with discounted cash-flows," Omega, Elsevier, vol. 117(C).
    17. Yu, Jonas C.P., 2019. "Optimizing a two-warehouse system under shortage backordering, trade credit, and decreasing rental conditions," International Journal of Production Economics, Elsevier, vol. 209(C), pages 147-155.
    18. Pahl, Julia & Voß, Stefan, 2014. "Integrating deterioration and lifetime constraints in production and supply chain planning: A survey," European Journal of Operational Research, Elsevier, vol. 238(3), pages 654-674.
    19. Beullens, Patrick & Janssens, Gerrit K., 2011. "Holding costs under push or pull conditions - The impact of the Anchor Point," European Journal of Operational Research, Elsevier, vol. 215(1), pages 115-125, November.
    20. Panda, S. & Saha, S. & Goyal, S.K., 2013. "Dilemma of rented warehouse and shelf for inventory systems with displayed stock level dependent demand," Economic Modelling, Elsevier, vol. 32(C), pages 452-462.
    21. Haider Ali & Reshma Nasreen & Neetu Arneja & Chandra K. Jaggi, 2024. "Periodic inventory model with controllable lead time and back order discount for decaying items," OPSEARCH, Springer;Operational Research Society of India, vol. 61(3), pages 1441-1471, September.
    22. Jareño, Francisco & Navarro, Eliseo, 2010. "Stock interest rate risk and inflation shocks," European Journal of Operational Research, Elsevier, vol. 201(2), pages 337-348, March.
    23. Tiwari, Sunil & Cárdenas-Barrón, Leopoldo Eduardo & Khanna, Aditi & Jaggi, Chandra K., 2016. "Impact of trade credit and inflation on retailer's ordering policies for non-instantaneous deteriorating items in a two-warehouse environment," International Journal of Production Economics, Elsevier, vol. 176(C), pages 154-169.

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