Two-warehouse inventory models for deteriorating items with shortages under inflation

In this paper, the two-warehouse inventory problem for deteriorating items with constant demand rate and shortages under inflation is considered. In contrast to the traditional deterministic two-warehouse inventory model with shortages at the end of each replenishment cycle, an alternative model in which each cycle begins with shortages and ends without shortages is proposed here. The optimal solution not only exists but also is unique. Comparing these two two-warehouse inventory models, the study shows that the proposed model is less expensive to operate than the traditional one in the case of the inflation rate is greater than zero. Hence, under the consideration of inflationary effect, the proposed model is less expensive. Finally, some numerical examples for illustration are provided. (C) 2003 Elsevier B.V. All rights reserved.