On an inventory model with two levels of storage and stock-dependent demand rate

An order-level inventory model is developed by assuming that the demand rate is stock-dependent and two separate warehouses are used. When the stock level exceeds the capacity of the own warehouse (OW), a rented warehouse (RW) is used. The stock is transferred periodically in bulk from RW to OW and there is an associated transportation cost. No shortages are allowed. An algorithm is developed to obtain the optimal solution of the model. To study the effects of changes in the system parameters on the decision variables, a sensitivity analysis is carried out by taking a numerical example.