Comments on Two Models for Operating Two-Warehouse Inventory Systems with Deteriorating Items and Inflationary Effects

Huachun Xiong, Jinxing Xie and Bo Niu
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Huachun Xiong: Tsinghua University, China
Jinxing Xie: Tsinghua University, China
Bo Niu: China Railway Express Co., China

International Journal of Operations Research and Information Systems (IJORIS), 2011, vol. 2, issue 2, 1-21

Abstract: This paper deals with the two-warehouse partial backlogging inventory problems under inflation for a deteriorating product with a constant demand rate over an infinite horizon. In contrast to the traditional model in which each replenishment cycle starts with an instant replenishment and ends with shortages, an alternative model is proposed in recent literature in which each cycle starts with shortages. It is proven to be less expensive to operate than the traditional model in terms of the present value of the cost per unit time. The present paper points out that the criteria of minimizing the cost per unit time is unreasonable when the inflationary effect is taken into consideration, and instead, the criteria of minimizing the present value of the total cost over the whole infinite planning horizon should be used. The objective functions of these two models are changed and proved that the model with shortages at the start of the cycle is less expensive to operate than the traditional model in terms of the present value of the total cost, but the optimal solutions of the models minimizing the cost per unit time indicate significantly higher total costs.

Date: 2011
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