Managing dual warehouses with an incentive policy for deteriorating items |
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Authors: | Jonas C.P. Yu Kung-Jeng Wang |
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Affiliation: | 1. Department of Logistics Management, Takming University of Science and Technology, Taipei, Taiwan;2. Department of Industrial Management, National Taiwan University of Science and Technology, Taipei, Taiwan |
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Abstract: | Distributors in a supply chain usually limit their own warehouse in finite capacity for cost reduction and excess stock is held in a rent warehouse. In this study, we examine inventory control for deteriorating items in a two-warehouse setting. Assuming that there is an incentive offered by a rent warehouse that allows the rental fee to decrease over time, the objective of this study is to maximise the joint profit of the manufacturer and the distributor. An optimisation procedure is developed to derive the optimal joint economic lot size policy. Several criteria are identified to select the most appropriate warehouse configuration and inventory policy on the basis of storage duration of materials in a rent warehouse. Sensitivity analysis is done to examine the results of model robustness. The proposed model enables a manufacturer with a channel distributor to coordinate the use of alternative warehouses, and to maximise the joint profit of the manufacturer and the distributor. |
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Keywords: | deteriorating items two-warehouse supply chain management inventory |
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