Order level lot-size inventory model with permissible delay in payments for a system with two storage facilities

Abstract

In this paper a mathematical model of order level lot-size inventory model under permissible delay in payment is considered with two storage facilities. The supplier allows time for settling payments for no interest charges are payable. Here an inventory system under consideration does not have sufficient capacity to store the on-hand inventory in own warehouse after meeting the back-logged demand. In such a case W units are stored in own warehouse an rest in a rented warehouse. This paper an attempt is made to analyses: a) when the system has both warehouse facilities to accommodate the lot-size; b) own warehouse has large capacity to store the on-hand inventory; and c) maximum is stored in own warehouse. The system suggests when to hire rented warehouse for more profitability among the given alternatives. Expressions for optimal order quantity and order level are developed for all the cases with an example.