Two-warehouse inventory model for deteriorating items with price-sensitive demand and partially backlogged shortages under inflationary conditions

Abstract

In today's competition inherited business world, managing inventory of goods is a major challenge in all the sectors of economy. The demand of an item plays a significant role while managing the stock of goods, as it may depend on several factors viz., inflation, selling price, advertisement, etc. Among these, selling price of an item is a decisive factor for the organization; because in this competitive world of business one is constantly on the lookout for the ways to beat the competition. It is a well-known accepted fact that keeping a reasonable price helps in attracting more customers, which in turn increases the aggregate demand. Thus in order to improve efficiency of business performance organization needs to stock a higher inventory, which needs an additional storage space. Moreover, in today's unstable global economy there is consequent decline in the real value of money, because the general level of prices of goods and services is rising (i.e., inflation). And since inventories represent a considerable investment for every organization, it is inevitable to consider the effects of inflation and time value of money while determining the optimal inventory policy. With this motivation, this paper is aimed at developing a two-warehouse inventory model for deteriorating items where the demand rate is a decreasing function of the selling price under inflationary conditions. In addition, shortages are allowed and partially backlogged, and the backlogging rate has been considered as an exponentially decreasing function of the waiting time. The model jointly optimizes the initial inventory and the price for the product, so as to maximize the total average profit. Finally, the model is analysed and validated with the help of numerical examples, and a comprehensive sensitivity analysis has been performed which provides some important managerial implications.

Quality and selling price dependent sustainable perishable inventory policy: Lessons from Covid-19 pandemic

“… The demand rate D(b, Q,θ) is a function of selling price b and the quality parameter Q (Q defines the effect of quality on the item demand: Q > 0) (Jaggi et al 2015 ; Yang et al 2020 ) as shown in Fig. 2 .…”

“…This section explains the change in average profit caused due to demand disruption. The input parameters provided here has been derived from the past literature works of (Jaggi, et al 2015 ; Rana et al 2021a ; Mishra et al 2020 ).…”

Estimating travel times in dual shuttle AS/RSs.: A revised approach

“…In current competitive business environments keeping good inventories appropriately has become a key challenge for most industries (Jaggi et al, 2015) and this requires a careful warehouse design and management. Automated Storage and Retrieval Systems (AS/RSs) are warehousing systems widely applied to both distribution and production settings, especially in case of a large amount of products to store and high throughput rates.…”

An economic order quantity model for deteriorating products having stock dependent demand with trade credit period and preservation technology

“…Singh and Rathore (2014) developed an inventory model for deteriorating item with reliability consideration and trade credit. Jaggi et al (2015) come forward with two-warehouse inventory model for deteriorating items with price sensitive demand and partially backlogged shortages under inflationary environment conditions. After that Tayal et al (2015) presented a production inventory framework for non-instantaneous deteriorating items with time dependent holding cost and exponential demand rate.…”