Excess inventory sales and lot-sizing of deteriorating items at two storage facilities

Abstract

In this thesis a problem of optimal stocking by excess inventory sales and lot-sizing is considered for a single deteriorating item which is stored at two distinctly different warehouses such as ordinary and special ones. Both the infinite and the finite horizon models are analyzed, in which the deterioration is assumed to be a constant fraction of the on-hand inventory. Both the models assume instantaneous delivery and do not allow any shortage. An ordinary warehouse with abundant capacity is employed to store the excess units over the capacity of a special warehouse. The special warehouse is assumed to charge a higher unit holding cost than the ordinary warehouse. The special warehouse capacity is then determined in its upper bound. The optimal inventory amount to be retained out of the excess units and the optimal lot-size are finally determined. Numerical examples are presented.