A Model of a Multi-Product Two-Stage Inventory System with Limited Intermediate Bulk Storage Capacity

Hans G. Daellenbach
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Hans G. Daellenbach: University of Canterbury, New Zealand

Management Science, 1977, vol. 23, issue 12, 1314-1320

Abstract: A firm has a limited number of bulk storage tanks available for intermediate storage. A joint decision as to the assignment of products to tanks and the inventory stocking and replenishing policy for each product has to be made. It is shown that for a given inventory policy the minimization of the total cost expression can be transformed into a nested optimization problem involving three phases. These can be optimized sequentially starting with the innermost phase. The last phase turns out to be a transportation problem. The solution for an example involving 18 products and 10 tanks is presented and discussed.

Date: 1977
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