A model on two storage inventory system under stock dependent selling rate incorporating marketing decisions and transportation cost with optimum release rule

In the retail business, an additional storage (warehouse) is very essential to reduce the lost sale. Particularly, when the area of the existing storage (Owned warehouse, OW) in an important market place (like, super market, corporation market etc.) is relatively small, the need of the additional storage can be released. In this paper, a single item inventory model is developed considering two separate storage facilities (owned warehouse, OW and rented warehouse, RW) due to insufficient space of existing warehouse. The stocks of additional storage RW are transferred to OW in bulk release pattern and the associated transportation cost is taken into account. Here, we consider the effect of different stock-dependency and marketing policies such as the price variation and the frequency of advertisement on the selling rate of an item. Shortages are not allowed. To replenish the item to the storage/warehouse, transportation cost is considered explicitly. In most situations, this cost is assumed to be fixed and are, therefore, included in the ordering cost or variable and included in the cost of the item. Here, it is assumed that this transportation cost is depended on the lot-size as well as the distance between the source and the destination. Different cases of the system have been mentioned and developed. A numerical example is given to illustrate the solution procedure of the model. Finally, based on this example, a sensitivity analysis is done for the effect of different parameters on the optimal profit and cycle length. Scope and purpose The existing two storage models were developed based on the assumption that storage capacity of the rented warehouse (RW) is unlimited. Obviously, this is an unrealistic assumption as the capacity of storage is always limited. In this paper, a two storage inventory model with frequency of advertisement, selling price and stock-dependent selling rate is developed considering limited storage capacity of the rented warehouse. This model is solved by a gradient method based mathematical program. This methodology of model development and its solution are quite general and it can be applied to inventory models of any item whose selling rate is dependent on stock-level and marketing decisions. The purpose of this paper is to report an economic replenishment policy in which decision-makers can know when and how much amount to replenish as well as which system to choose for storing the replenished items. Keywords and Phrases: Stock-dependent selling rate, Inventory, Two storage, Transportation, Bulk released pattern.
1. Introduction Now-a-days, an item is well known to the people in the modern society through advertisement in the well-known media like, Newspaper, Magazine, Radio, TV, Cinema etc. and also [...]