OPTIMAL PRICING AND REPLENISHMENT POLICY FOR NONINSTANTANEOUS DETERIORATING ITEMS AND TWO LEVELS OF STORAGE

In this paper an inventory control system for deteriorating items with price and time-dependent demand is studied. The majority of the existing literature in inventory systems for deteriorating items, deals with items that are subject to deterioration as soon as they enter the warehouse. However, there are items that have a shelf-life and start deteriorating after a time lag (noninstantaneous deteriorating items). Under some special circumstances, i.e., attractive price discount, low storage cost, high demand, etc; the procurement of a large amount of such items at a time is decided. Because of the fixed capacity of the own warehouse (OW), a rented warehouse (RW) is used to store the excess quantity. In the present paper, a two-warehouse inventory model for noninstantaneous deteriorating items is developed. Shortages at OW are also allowed and partially backlogged at a rate, which is any nonincreasing function of the waiting time up to the next replenishment. For this model, we propose a simple solution procedure to determine the optimal pricing and replenishment schedule.