Two‐warehouse inventory model for deteriorating items: a study with shortages under inflation and time value of money

In this study, a two‐warehouse inventory model for deteriorating items with shortages under inflation and time value of money was developed. An inventory model for deteriorating items having two separate warehouses, one is an own warehouse (OW) of finite dimension and the other is a rented warehouse (RW) of infinite horizon, was developed under inflation and time value of money. Deterioration rates of items in the two warehouses were time dependent. In addition to this, shortages were considered and were complete backlogging. The inventory holding cost was considered to be different in different warehouses, due to different facilities and storage environment. In this model, the demand rate of items was in non‐linear form that depended upon time, the stocks of RW transported to OW in continuous release pattern. A numerical example and sensitivity analysis are presented to illustrate the model. From the sensitivity analysis, it was tried to prove that the total cost of the system is influenced by the deteriorating, shortages and the inflation rate.