Two-warehouse inventory model for deteriorating items with linear trend in demand and shortages under inflationary conditions

Chandra K. Jaggi and Priyanka Verma

International Journal of Procurement Management, 2010, vol. 3, issue 1, 54-71

Abstract: Inflation plays a very interesting and significant role: it increases the cost of goods. To safeguard from the rising prices, during the inflation regime, the organisation prefers to keep a higher inventory, thereby increasing the aggregate demand. This additional inventory needs additional storage space that is facilitated by a rented warehouse. Ignoring the effects of time value of money and inflation might yield misleading results. In the present study, a 'two-warehouse inventory model with linear trend in demand under the inflationary conditions' has been developed. A rented warehouse (RW) is used to store the excess units over the capacity of the own warehouse (OW). The stock is being transferred from rented warehouse to own warehouse in a continuous release pattern with per unit transportation cost being factored in. The solution methodology provided in the model helps to decide on the feasibility of renting a warehouse. The results have been elucidated with numerical examples.

Keywords: inventory modelling; rented warehouses; deterioration; shortages; inflation; deteriorating items; warehouse renting. (search for similar items in EconPapers)
Date: 2010
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