A study of a two storage single product inventory system with ramp type demand, N-phase prepayment and purchase for exigency

Abstract

This model considers a two-warehouse inventory system of deteriorated items with ramp-type demand and a constant rate of deterioration. It is maintained a rental warehouse (𝑅𝑊 ) of infinite capacity to load the excess items of replenished goods after filling the items of finite capacity in the own warehouse (𝑂𝑊 ). Retailers are encouraged to opt for the prepayment option of paying their purchase cost in equal installments prior to the delivery of the ordered items with a considerable discount, which will ensure the purchase guarantee of their orders. The slotted backlog interval of the stock out period is handled in two different ways to retain the customers and ease their impatience. Customers in the first slot of the stock out period are satisfied by the emergency purchases from local suppliers with high purchasing costs to avoid losing customers. Customers in the next slot are satisfied immediately after the next replenishment point. Essential measures of the system are derived: optimal ordering quantities from both regular and local suppliers; replenishment cycle length; and a partitioned backlog interval. A numerical example is given along with the optimal solutions for a particular environment with sensitive analysis in order to validate the model’s efficacy.