Inventory models with system constraints and changing transportation cost structure

The problem of integrating inventory and transportation costs into a cost effective strategy for a system consisting of several factory warehouses and several geographically dispersed godowns is considered in this paper. Each factory manufactures a single product which is dispatched to all or some of the godowns. Each godowns has its own specific demand pattern for each of the products. The inventory control and distribution activities for all factories and godowns is centrally coordinated. An EOQ model has been developed considering transportation costs, both for deterministic and stochastic demand cases. The model has been further extended to explicitly take into account the constraints of storage space and limit on the total number of orders in the system.