1P.G. Dept. of Statistics, Utkal University, Vani Vihar, Bhubaneswar-751004, Orissa, India.
2College of Engineering (MBA), Bhubaneswar.
3Dept. of Mathematics, Orissa Engineering College, Bhubaneswar.
This Paper has been presented at the National Seminar on Financial Engineering held during Dec. 2006.
A new type of replenishment policy is suggested for an item with Bi-level storage in a finite horizon with exponentially declining demand. The importance of the closed form solutions obtained is that they remove the need for enumeration over alternative values of storage capacity in determining the optimum ordering cost. Also, they can be encoded in an algorithm which is simple to implement and they allow easy sensitivity analysis. A number of numerical experiments are carried out to analyse the magnitude of the approximation error in the average system cost with variation in the number of shipments. In order to make the comparisons of optimal solutions equitable the behaviour of the optimal solution with respect to cost parameters is investigated. It is seen that the cost parameters and demand could change the total system cost without causing any violation in the capacity constraints. However, the optimal solution is sensitive to change in the holding cost in the rented warehouse (RW) and deterioration of the item. Depending on the actual demand, the inclusion of actual storage capacity at own warehouse (OW) may have a larger impact on the system cost rather than the recognition of cost of own or rented warehouse. Finally, numerical results are presented to support the model to compute various model with present change of its different parameters which describe the effect of inventory model on the decision variables on the system performance. Further, the sensitivity of the optimal solution is also studied with respect to changes in different parameter values.
Inventory, exponential demand, Bi-level storage, Subject classification no. (1991)
