CEJOR (2012) 20:251–280

DOI 10.1007/s10100-010-0165-4

ORIGINAL PAPER

Two-warehouse production model for deteriorating

inventory items with stock-dependent demand under
inflation over a random planning horizon

Debasis Das · Mohuya B. Kar · Arindam Roy ·

Samarjit Kar

Published online: 10 October 2010

© Springer-Verlag 2010

Abstract This paper develops a production-inventory model for a deteriorating item

with stock-dependent demand under two storage facilities over a random planning hori-
zon, which is assumed to follow exponential distribution with known parameter. The
effects of learning in set-up, production, selling and reduced selling is incorporated.
Different inflation rates for various inventory costs and time value of money are also
considered. A hybrid genetic algorithm is designed to solve the optimization problem
which is hard to solve with existing algorithms due to the complexity of the decision
variable. To illustrate the model and to show the effectiveness of the proposed approach
a numerical example is provided. A sensitivity analysis of the optimal solution with
respect to the parameters of the system is carried out.

Keywords Two-warehouse · Stock-dependent demand · Learning effect · Inflation

and time value of money · Random planning horizon · Hybrid genetic algorithm

D. Das · S. Kar
Department of Mathematics, National Institute of Technology, Durgapur, West Bengal 713209, India
e-mail: debasis_opt@yahoo.co.in
S. Kar
e-mail: kar_s_k@yahoo.com

M. B. Kar (B)
Department of Computer Science and Engineering, Heritage Institute of Technology, Kolkata,
West Bengal 700107, India
e-mail: mohuya_kar@yahoo.com

A. Roy
Department of Computer Science, Prabhat Kumar College, Contai, Purba-Medinipur,
West Bengal 721401, India
e-mail: royarindamroy@yahoo.com

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1 Introduction

In some practical situations, the supplier may provide price discounts for bulk pur-
chases of the raw materials like when the item under consideration is a seasonal
product such as the output of the harvest or the production cost is higher than the
other related cost, the inventory manager may produce more goods than can he stored
in its own warehouse (OW). The excess quantities are stored in a rented warehouse
(RW). From the economical point of view, they usually choose a RW than rebuild
a new warehouse. The inventory costs (including holding and deterioration costs) in
RW are usually higher than those in OW due to additional cost of maintenance and
material handling etc. To reduce the inventory costs it will be economical to serve the
customer from RW. There are several related papers presented in the field of inventory
management such as Hartely (1976), Pakhala and Achary (1992a,b), Bhunia and Maiti
(1998), Kar et al. (2001), Panda et al. (2009a,b) and others.
Due to high inflation and consequent sharp decline in the purchasing power of
money in practical environment, specially in the national market of the developing
countries like Brazil, Argentina, India, Bangladesh, etc., the financial situation is being
continuously changed and so it is not possible to ignore the effect of inflation and time
value of money any further. Following Buzacott (1975) and Misra (1979), several
researchers (Ray and Chaudhuri 1997; Sarkar et al. 2000; Balkhi 2004; Dey et al.
2004, etc.) have extended their approaches to different inventory models by consid-
ering the time value of money, different inflation rates for the internal and external
costs, finite replenishment, shortages, etc. Recently, Yang (2004) developed a two-
warehouse inventory model for deteriorating items with constant demand, shortages
under inflation.
In the existing literature of inventory control problems it is implicitly assumed that
lifetime of the product is infinite and models are developed under finite or infinite
planning horizon. But for real life inventory problems, infinite lifetime of a product is
of rare occurrence because the costs are likely to vary disproportionately and because
of change in product specifications and design or its abandonment or substitution by
another product due to rapid development of technology (cf. Gurnani 1983 and Chung
and Kim (1989)). Again assumption of finite planning horizon is not appropriate if it
is crisp in nature, e.g., for a seasonal product, though planning horizon is normally
assumed as finite and crisp, it fluctuates in every year depending upon the rate of pro-
duction, environmental effects etc. and it is better to estimate this horizon as stochastic
in nature. Moon and Yun (1993) developed an EOQ model in random planning hori-
zon. Moon and Lee (2000) further developed an EOQ model under inflation and time
discounting with a random product life cycles. Recently, Roy et al. (2007, 2009) devel-
oped inventory models with stock dependent demand over a random planning horizon
under imprecise inflation and finite discounting. To the best of the author’s knowledge,
at present, none has developed two-warehouse production-inventory model incorpo-
rating lifetime of a product as random in nature.
Incorporating the above mentioned shortcomings, here a production-inventory
model for deteriorating items is developed in a random planning horizon, i.e., lifetime
of the product is assumed as random in nature and it follows an exponential distribu-
tion with known means. Unit production cost decreases in each production cycle due

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Two-warehouse production model for deteriorating inventory items 253

to learning effects (cf. Jaber and Bonney 2001; Jaber et al. 2008) of the workers on
production. Similarly, setup cost in each cycle is partly constant and partly decreases
in each cycle due to learning effects of the employees. Model is formulated to maxi-
mize the expected profit from the whole planning horizon and is solved using hybrid
genetic algorithm (HGA). A numerical example is presented to help understand the
modelling idea. In addition, the sensitivity analysis of the optimal solution with respect
to parameters of the system is carried out.

2 Genetic algorithm (GA)

Genetic algorithms are randomized search and optimization techniques, guided by the
principles of evolution and natural genetics, which search large and complex land-
scapes using implicit parallel searching capability and can provide optimal or near
optimal solution. Basically, three genetic operators are used in GAs namely selection,
crossover and mutation. A fixed population size is considered. Each member of the
population is called a chromosome. The initial population is generated randomly or
using some domain specific knowledge.

2.1 Basic genetic algorithm

begin
g=0
initialize P(g)
evaluate P(g) using fitness function
termination− condition=false
while (NOT termination− condition) do
begin
g=g+1
select parents from P(g)
crossover
mutation
evaluate P(g+1) using fitness function
end
end

The parameters that control the quality of solution and rate of convergence are,
crossover probability Pc , mutation probability Pm and the population size N. As N
increases, the probability of reaching the global optimum increases at the cost of com-
putational efficiency. Currently the elitist strategy is almost always used with GAs to
ensure the occurrence of the best string, in the next generation.This checks possible
jump from the global optimum in the solution space.
The success of a GA procedure for a particular problem depends on (i) coding used
for representing the solutions; (ii) fitness function that evaluates each solution; and
(iii) form of the genetic operators used to manipulate solution strings or chromosomes.
Since, a large variation of these genetics operators is possible, GAs can take different

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forms and a particular form may be better for a particular application. Experiments
on GA show that the use of different kinds of other operators or modified genetic
operators may become effective in many situations. Davis (1991) strongly suggested
the use of other optimization techniques along with GA models for developing hybrid
GAs which contain some of the best features from the original algorithms.

2.2 New selection strategy and hybrid GA

In the new method of selection, called stochastic selection a chromosome with a value
xi is considered from a pool P(g) of generation g and is selected based on Boltzmann
probability distribution function.
Let it be assumed that f max is the fitness of the currently available best string. If the
next string has fitness f (xi ) such that f (xi ) > f max , then the new string is selected
otherwise it is selected with Boltzmann probability

P = ex p [− ( f max − f (xi )) 
/T ] , g
where T = T0 (1 − α)κ and κ = 1 + 100 ; (1)
G

g is the current generation number; G, the maximum value of g. The value of α

can be chosen from the range [0, 1], and T0 from the range [5, 100]. Equation (1)
shows that the value of T decreases exponentially or at logarithmic rate with increase
in the value of g and hence the value of the probability P. This is significant in terms
of convergence. The final state is reached when computation approaches zero value
of T, i.e. the global solution is achieved at this point.
In the proposed hybrid GA algorithm, the probability that the best string is selected
and automatically included as a member of the selected population is very high. How-
ever, elitism is suggested to eliminate the chance of any undesired loss of information
during the mutation stage.
The proposed hybrid algorithm
begin
g=0
initialize (T, P(g))
evaluate P(g) using fitness function
f max maximum fitness of P(g)
termination− condition=false
while (NOT termination− condition) do
begin
g=g+1
for i=1 to N do
begin
if f max − f (xi ) ≤ 0
then select xi from P(g) and set f max to f (xi )
else if ex p [− ( f max − f (xi ))/T ] >random [0, 1]
then select xi from P(g)
else select x corresponding to f max

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Two-warehouse production model for deteriorating inventory items 255

end
crossover
mutation
evaluate P(g+1) using fitness function
lower T
end
end

The proposed method is unique in the sense that for selection operations to become
active, it is not necessary to wait until the pool of the previous generation is completely
developed.

3 Assumptions and notations

The mathematical model in this paper is developed on the basis of following assump-
tions and notations:

3.1 Assumptions

(i) Inventory system involves two warehouses OW and RW and only one item and
is a self production system.
(ii) The time horizon is stochastic and follow exponential distribution with known
parameter.
(iii) The time horizon accommodates first N full cycles and ends during (N + 1)th
cycle.
(iv) Shortages are not permitted.
(v) Lead time is zero.
(vi) The OW has a fixed capacity whereas the RW has unlimited capacity.
(vii) Set-up time is negligible.
(viii) Production rate is known and constant.
(ix) The constant fraction of on hand inventory gets deteriorated per unit time.
(x) Transportation cost be negligible.
(xi) Set-up and production costs decreases due to the learning in set-ups and
improvement in quality.
(xii) The inventory carrying cost in RW is higher than that in OW.

3.2 Notations (For jth cycle, j = 1, 2, . . . , N .)

P  = Production rate in each cycle.

W = Fix capacity level of OW.
q1 (t) = On-hand inventory of the item at time t, in OW.
q2 (t) = On-hand inventory of the item at time t, in RW.
C3 = The set-up cost per production run.

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256 D. Das et al.

C3 = C3 + C3 e−δ j is set-up cost in jth cycle, δ > 0 (δ is the learning coefficient
j

associated with set-up cost).

p0 e−γ j = Production cost in jth cycle, p0 , γ > 0 (γ is the learning coefficient asso-
ciated with production cost).
m 0 p0 e−γ j = Selling price in jth cycle, p0 , γ > 0, with mark-up m 0 > 1.
m 1 p0 e−γ (N +1) = Reduced selling price at the end of time horizon in last cycle,
p0 , γ > 0, with mark-up m 1 < 1.
Cow = The carrying cost per inventory unit held in OW per unit of time.
Crw = The carrying cost per inventory unit held in RW per unit of time. From assump-
tion (xii) we have Crw > Cow .

The demand rate D(t) is assumed to vary with stock level at OW and is of the form:
⎧
⎪
⎪ α + βq1 (t), ( j − 1)T ≤ t ≤ ( j − 1)T + t1
⎨
α + βW, ( j − 1)T + t1 ≤ t ≤ ( j − 1)T + t2
D(t) =
⎪
⎪ α + βW, ( j − 1)T + t2 ≤ t ≤ ( j − 1)T + t3
⎩
α + βq1 (t), ( j − 1)T + t3 ≤ t ≤ j T,
where α > 0, β > 0.

θ1 , θ2 = The constant deterioration rate in OW and RW respectively,

where 0 < θ1 < 1, 0 < θ2 < 1.
N = Number of fully accommodated cycles to be made during the prescribed time
horizon.
T = Duration of a complete cycle.
i = Inflation rate.
r = Discount rate.
R = r − i, the net discount rate of inflation is constant.
V (N , T ) = Total profit after completing N fully accommodated cycles.
H = Time horizon (a random variable) and h is the real time horizon.
E{V (N , T )} = Expected total profit from N complete cycles.
E{T VL (T )} = Expected total profit from last cycle.
E{T V (T )} = Expected total profit from the planning horizon.

4 Model formulation

In the development of the two warehouse production model, we assume that there are
N full cycles during the real time horizon h and the planning horizon ends within
(N + 1)th cycle, i.e., within t = N T and t = (N + 1)T . At the beginning of every
jth ( j = 1, 2, . . . , N + 1) cycle production and demand occur simultaneously, at
t = ( j − 1)T . Inventory items in OW begin to accumulate up to W units with deterio-
ration. After t = ( j − 1)T + t1 the produced quantity exceeding W must be stored in
RW and production continuous up to t = ( j − 1)T + t2 (cf. Figs. 1, 2, 3 and 4). At the
end of production, t = ( j − 1)T + t2 the inventory in RW would be depleted due to
demand and deterioration and it vanishes at t = ( j −1)T +t3 . During t = ( j −1)T +t1
and t = ( j − 1)T + t3 , inventory in OW are also lowered at a level below W due

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Two-warehouse production model for deteriorating inventory items 257

Fig. 1 The graphical representation of the inventory cycles in a two ware house production system when
N T < h < N T + t1

Fig. 2 The graphical representation of the inventory cycles in a two ware house production system when
N T + t1 < h < N T + t2

to deterioration only. The remaining stock in OW are then fully depleted at t = j T

due to both demand and deterioration. This cycle repeats again and again. For the last
cycle some amount may be left after the end of planning horizon. This amount is sold
at a reduced price in a lot.
Here, it is assumed that the planning horizon H is a random variable and follows
exponential distribution with probability density function (p.d.f) as

λe−λh , h≥0
f (h) = (2)
0, otherwise.

4.1 Formulation for N full cycles

The differential equations describing the inventory levels q1 (t) and q2 (t) in the interval
( j − 1)T ≤ t ≤ j T (1 ≤ j ≤ N ), j = 1, 2, . . . , N are given as follows,
⎧ 
P − (α + βq1 (t)) − θ1 q1 (t), ( j − 1)T ≤ t ≤ ( j − 1)T + t1
dq1 (t) ⎨
= −θ1 q1 (t), ( j − 1)T + t1 ≤ t ≤ ( j − 1)T + t3 (3)
dt ⎩
−(α + βq1 (t)) − θ1 q1 (t), ( j − 1)T + t3 ≤ t ≤ j T,

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258 D. Das et al.

Fig. 3 The graphical representation of the inventory cycles in a two ware house production system when
N T + t2 < h < N T + t3

Fig. 4 The graphical representation of the inventory cycles in a two ware house production system when
N T + t3 < h < (N + 1)T

and


dq2 (t) P  − (α + βW ) − θ2 q2 (t), ( j − 1)T + t1 ≤ t ≤ ( j − 1)T + t2
= (4)
dt −(α + βW ) − θ2 q2 (t), ( j − 1)T + t2 ≤ t ≤ ( j − 1)T + t3 ,

where P  > α + βW , α > 0, β > 0, θ1 > 0, θ2 > 0 and 0< t1 < t2 < t3 < T ,
subject to the conditions that, q1 (t) = 0 at t = ( j−1)T , q1 (t) = W at t = ( j−1)T +t1 ,
q1 (t) = 0 at t = j T , q2 (t) = 0 at t = ( j −1)T +t1 and q2 (t) = 0 at t = ( j −1)T +t3 .
The solutions of the differential equation (3) are given by,

⎧
⎪ P  −α (θ1 +β){( j−1)T −t}
⎨ θ1 +β 1 − e , ( j − 1)T ≤ t ≤ ( j − 1)T + t1
q1 (t) = W.e θ 1 {( j−1)T +t1 −t}, ( j − 1)T + t1 ≤ t ≤ ( j − 1)T + t3 (5)
⎪
⎩ α
θ1 +β e(θ1 +β)( j T −t) − 1 , ( j − 1)T + t3 ≤ t ≤ j T.

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Two-warehouse production model for deteriorating inventory items 259

and the solutions of the differential equation (4) are given by,
⎧ 
⎨ P −α−βW 1 − eθ2 {( j−1)T +t1 −t} , ( j −1)T +t1 ≤ t ≤ ( j − 1)T + t2
θ2
q2 (t) =
⎩ α+βW eθ2 {( j−1)T +t3 −t} − 1 , ( j −1)T +t2 ≤ t ≤ ( j −1)T + t3 .
θ2
(6)

Now at t = ( j − 1)T + t1 , from (5) we get,

1 P − α
t1 = ln . (7)
θ1 + β (P  − α) − W (θ1 + β)

Now at t = ( j − 1)T + t2 , from (6) we get,

1 P  − α − βW 
t3 = t2 + ln 1 + 1 − eθ2 (t1 −t2 ) . (8)
θ2 α + βW

And at t = ( j − 1)T + t3 , from (5) we get,

1 W (θ1 + β) (θ1 t1 +βt3 )

T = ln e + e(θ1 +β)t3 . (9)
θ1 + β α

4.2 Total expected profit from N full cycles

From symmetry of every full cycle, present value of total expected profit from N full
cycles, E{V (N , t2 )}, is given by

E{V (N , t2 )} = ESRN − EPCN − EHCON − EHCRN − ETOCN, (10)

where ESRN, EPCN, EHCON, EHCRN and ETOCN are present value of expected
total sales revenue, present value of expected total production cost, present value of
expected holding cost in OW, present value of expected holding cost in RW and pres-
ent value of expected total ordering cost respectively from N full cycles and their
expressions are derived in Appendix A.1 (see Eqs. 32, 26, 20, 23, 29, respectively).

4.3 Formulation for last cycle

Duration of the last cycle is [N T, h].

Here four different cases may arise:
Case-1: NT < h ≤ N T + t1 ,
Case-2: NT + t1 < h ≤ N T + t 2 ,
Case-3: NT + t2 < h ≤ N T + t 3 ,
Case-4: NT + t3 < h ≤ (N + 1)T .

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260 D. Das et al.

The differential equations describing the inventory levels q1 (t) and q2 (t) in the interval
N T < t ≤ h are given by,
⎧ 
P − (α + βq1 (t)) − θ1 q1 (t), N T ≤ t ≤ N T + t1 ,
dq1 (t) ⎨
= −θ1 q1 (t), N T + t1 ≤ t ≤ N T + t3 , (11)
dt ⎩
−(α + βq1 (t)) − θ1 q1 (t), N T + t3 ≤ t ≤ (N + 1)T.

and

dq2 (t) P  − (α + βW ) − θ2 q2 (t), N T + t1 ≤ t ≤ N T + t2 ,
= (12)
dt −(α + βW ) − θ2 q2 (t), N T + t2 ≤ t ≤ N T + t 3 .

subject to the conditions that,

q1 (N T ) = 0, q1 (N T + t1 ) = W,
q2 (N T + t1 ) = 0, q2 (N T + t3 ) = 0 and q1 {(N + 1)T } = 0.

The solutions of the differential equations in (11) are given by,

⎧
⎪ P  −α (θ1 +β)(N T −t)
⎨ θ1 +β 1 − e ,N T ≤ t ≤ N T + t1 ,
q1 (t) = W.e 1θ {N T +t 1 −t} , N T + t1 ≤ t ≤ N T + t3 , (13)
⎪
⎩ α
θ1 +β e(θ1 +β){(N +1)T −t} − 1 , N T + t3 ≤ t ≤ (N + 1)T.

and the solutions of the differential equations in (12) are given by,
⎧
⎨ P  −α−βW
θ2 1 − eθ2 {N T +t1 −t} , N T + t1 ≤ t ≤ N T + t2
q2 (t) = (14)
⎩ α+βW
eθ2 {N T +t3 −t} − 1 , N T + t2 ≤ t ≤ N T + t 3 .
θ2

In last cycle, four cases may arise depending upon the cycle length. Here h be the real
time horizon corresponding to the random time horizon H.

4.4 Expected total profit from last cycle

Present value of expected total profit from last cycle is given by,

E{T VL (t2 )} = ESR L + ERSP L − EHCO L − EHCR L − EPC L − EOC L . (15)

where ESR L , ERSP L , EHCO L , EHCR L , EPC L , EOC L are present value of expected
sales revenue, present value of expected reduced selling price, present value of
expected holding cost in OW, present value of expected holding cost in RW, present
value of expected production cost, present value of expected ordering cost respectively
from the last cycle and their expressions are derived in Appendix A.2 (see Eqs. 60,
66, 49, 54, 59, 65, respectively).

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Two-warehouse production model for deteriorating inventory items 261

Table 1 Results for above

α β t2 E{T V (t2 )}
inventory model
0.30 3.018 174.0893
30 0.35 3.157 239.9063
0.40 3.315 308.3737
0.30 3.563 512.6080
35 0.35 3.770 583.2839
0.40 3.993 657.3499
0.30 4.423 876.9633
40 0.35 4.737 955.3229
0.40 5.154 1038.3224

4.5 Total expected profit

Now, total expected profit from the complete time horizon is given by,
E{T V (t2 )} = E{V (N , t2 )} + E{T VL (t2 )}. (16)
So, the above problem can be formulated as,
Maximize E{T V (t2 )},
subject to, t2 ≥ 0.

5 Model verification

In this section, the hybrid GA (as discussed in Sect. 2) is used to solve the highly
non-linear algebraic model expressed in Eq. 16. The usefulness of this model is thus
demonstrated in a numerical example.

5.1 Numerical example

To illustrate the two-warehouse production model the following parameters are

considered:

C3 = $50, C3 = $100, Cow = $0.75, Crw = $0.85, P = 65, W = 25, δ = 0.1,
γ = 0.05, λ = 0.01, m 0 = 1.8, m 1 = 0.85, r = 0.1, i = 0.05 i.e. R = 0.05,
θ1 = 0.075, θ2 = 0.1, p0 = 4 in appropriate units.
The optimal value of the production time t2 along with maximum expected total
profit have been calculated for different values of the stock-dependent demand param-
eters α and β and results are displayed in Table 1.
When the stock-dependent demand increases, the expected total profit also
increases, which agrees with reality.

5.2 Sensitivity analysis

Sensitivity analyses are performed for this model w.r.to different values of the param-
eters λ, δ, γ and R and results are presented in Tables 2, 3, 4 and 5, respectively,

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Table 2 Effects of changing the

α β λ t2 E{T V (t2 )}
mean of the planning horizon λ
on the production time
0.009 3.117 258.3456
30 0.35 0.010 3.157 239.9063
0.011 3.205 222.3372
0.009 3.731 601.2066
35 0.35 0.010 3.770 583.2839
0.011 3.817 566.0249
0.009 4.727 974.7863
40 0.35 0.010 4.737 955.3229
0.011 4.788 936.4749

Table 3 Effects of changing the

α β δ t2 E{T V (t2 )}
learning parameter δ of the
set-up cost on the production
0.05 3.315 193.9092
time
30 0.35 0.10 3.157 239.9063
0.15 3.057 277.2171
0.05 3.965 541.0775
35 0.35 0.10 3.770 583.2839
0.15 3.639 618.0469
0.05 4.990 919.7872
40 0.35 0.10 4.737 955.3229
0.15 4.595 985.3229

Table 4 Effects of changing the

α β γ t2 E{T V (t2 )}
learning parameter γ of the
production cost on the
0.03 2.973 339.9209
production time
30 0.35 0.05 3.157 239.9063
0.07 3.311 153.9568
0.03 3.498 696.2843
35 0.35 0.05 3.770 583.2839
0.07 3.999 486.2848
0.03 4.334 1075.4111
40 0.35 0.05 4.737 955.3229
0.07 5.109 852.0139

when other input values are same. It is observed that expected profit decreases with
λ increases; when δ increases, then set-up cost decreases and as such expected profit
increases; also when γ increases, unit production cost ( p0 ) decreases, as well as sell-
ing price also decreases, then expected profit decreases and expected profit decreases
with R increases, which agrees with reality.

5.3 Special cases

The important special cases that influence the optimal present value of total expected
profit are described as follows:

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Two-warehouse production model for deteriorating inventory items 263

Table 5 Effects of changing the

α β R t2 E{T V (t2 )}
net discount rate of inflation R
on the production time
0.03 3.726 282.8332
30 0.35 0.05 3.157 239.9063
0.07 2.864 193.5842
0.03 4.397 763.4095
35 0.35 0.05 3.770 583.2839
0.07 3.437 445.3037
0.03 5.494 1345.9576
40 0.35 0.05 4.737 955.3229
0.07 4.354 719.3964

Table 6 Comparison of the

α β t2 E{T V (t2 )}
results for the special condition
R=0
0.30 2.976 207.7513
30 0.35 3.189 425.7543
0.40 3.423 659.8444
0.30 4.004 1333.2891
35 0.35 4.341 1627.5449
0.40 4.737 1946.6621
0.30 5.702 2857.0952
40 0.35 5.864 3263.2356
0.40 5.995 3666.9504

Table 7 Comparison of the

α t2 E{T V (t2 )}
results for the special condition
β=0
30 1.020 654.5405
35 1.121 1330.9419
40 1.235 1886.1182

1. The inflation and time value of money are not taken into account, i.e. R = 0.
2. The stock-dependent demand rate is neglected, i.e. β = 0.

Tables 6 and 7 show the comparative results for the optimal solutions from Table 1
with the above special cases respectively.

6 Conclusion

In this paper, a two-warehouse production-inventory model for deteriorating items

has been considered under inflation and time discounting over a random time horizon.
Also the learning effect on production and set-up costs are incorporated in a two-ware-
house production. In the existing literature for seasonal products, normally planning
horizon is finite. But in reality due to rapid change of economy, length of a product
cycle fluctuates every year. So it is very realistic to consider this planning horizon as
uncertain in nature.

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264 D. Das et al.

Here stochastic nature of planning horizon is considered. The proposed model can
be extended in numerous ways. For example, we may extend the stock-dependent
demand to the time-dependent demand pattern. Also, we could extend the model
to incorporating some more realistic features, such as variable production, allowing
shortages quantity discount etc. The model can also be extended in case there are some
inventory parameters are imprecise in nature.

Appendix A.1: Calculation for expected sales revenue for N full cycles

Present value of holding cost of the inventory for the jth(1 ≤ j ≤ N ) cycle in OW,
(HCO j ), is given by

⎡
( j−1)T
 +t1 ( j−1)T
 +t3
⎢ −Rt
HCO j = Cow ⎣ q1 (t) e dt + q1 (t) e−Rt dt
( j−1)T ( j−1)T +t1
⎤
j T
⎥
+ q1 (t) e−Rt dt ⎦
( j−1)T +t3

− α 1  −R( j−1)T
P 
= Cow e − e−R{( j−1)T +t1 }
θ1 + β R
1  
−(θ1 +β)t1 −R{( j−1)T +t1 } −R( j−1)T
+ e −e
θ1 + β + R
W 
− eθ1 (t1 −t3 )−R{( j−1)T +t3 } − e−R{( j−1)T +t1 }
θ1 + R
  
α 1
+ e(θ1 +β)(T −t3 )−R{( j−1)T +t3 } − e−R j T
θ1 + β θ1 + β + R
1  −R j T 
+ e − e−R{( j−1)T +t3 } . (17)
R

N  
1 − e−N RT
Also, e−R( j−1)T = . (18)
1 − e−RT
j=1

Total holding cost in OW from N full cycles, (HCON), is given by


 P − α 1  
N
HCON = HCO j = Cow 1 − e−Rt1
θ1 + β R
j=1
1  
− 1 − e−(R+θ1 +β)t1
θ1 + β + R

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Two-warehouse production model for deteriorating inventory items 265


W  θ1 (t1 −t3 )−Rt3  α 1 
− e − e−Rt1 + e(θ1 +β)(T −t3 )−Rt3
θ1 + R θ1 + β θ1 + β + R
 
 1   1 − e−N RT
−e −RT + e −RT −e −Rt 3 . (19)
R 1 − e−RT

So, the present value of expected holding cost in OW from N complete cycles,
(EHCON), is given by,

∞ (N+1)T

EHCON = HCON. f (h) dh
N =0 NT
 
P − α 1   1 
= Cow 1 − e−Rt1 − 1 − e−(R+θ1 +β)t1
θ1 + β R θ1 + β + R

W  θ1 (t1 −t3 )−Rt3 −Rt1
 α 1 
− e −e + e(θ1 +β)(T −t3 )−Rt3
θ1 + R θ1 + β θ1 + β + R
 1    e−λT

−e−RT + e−RT − e−Rt3 . (20)
R 1 − e−(R+λ)T

Present value of holding cost of the inventory for the jth(1 ≤ j ≤ N ) cycle in RW,
(HCR j ), is given by

⎡ ⎤
( j−1)T
 +t2 ( j−1)T
 +t3
⎢ ⎥
HCR j = Crw ⎣ q2 (t) e−Rt dt + q2 (t)e−Rt dt ⎦
( j−1)T +t1 ( j−1)T +t2

(P  − α − βW ) 1  −R{( j−1)T +t1 } 
= Crw e − e−R{( j−1)T +t2 }
θ2 R
1  θ2 (t1 −t2 )−R{( j−1)T +t2 } 
+ e − e−R{( j−1)T +t1 }
θ2 + R

α + βW 1  θ2 (t3 −t2 )−R{( j−1)T +t2 } 
+ e − e−R{( j−1)T +t3 }
θ2 θ2 + R
1  −R{( j−1)T +t3 } 
+ e − e−R{( j−1)T +t2 } . (21)
R

Total holding cost in RW from N full cycles, (HCRN), is given by


 1  −Rt1 
N
P  − α − βW
HCRN = HCR j = Crw e − e−Rt2
θ2 R
j=1

1  θ2 (t1 −t2 )−Rt2 
+ e − e−Rt1
θ2 + R

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266 D. Das et al.


α + βW 1  θ2 (t3 −t2 )−Rt2 
+ e − e−Rt3
θ2 θ2 + R

1 −Rt3   1 − e−N RT 
+ e − e−Rt2 . (22)
R 1 − e−RT

So, the present value of expected holding cost in RW from N complete cycles,
(EHCRN), is given by,
(N+1)T 
P  − α − βW 1  −Rt1 
∞

EHCRN = HCRN. f (h) dh = Crw e − e−Rt2
θ2 R
N =0 N T
 
1  θ2 (t1 −t2 )−Rt2 −Rt1  α+βW 1  θ2 (t3 −t2 )−Rt2 −Rt3
+ e −e + e −e
θ2 + R θ2 θ2 + R
1  −Rt3   e−λT

+ e − e−Rt2 . (23)
R 1 − e−(R+λ)T

Present value of production cost for the jth(1 ≤ j ≤ N ) cycle, (PC j ), is given by

( j−1)T
 +t2
−γ j  p0 e−γ j .P   
PC j = p0 e .P e−Rt dt = 1 − e−Rt2 e−R( j−1)T . (24)
R
( j−1)T

Present value of total production cost from N full cycles (PCN), is given by
 

N
p0  RT 1 − e−N (γ +RT )
−Rt2 −(γ +RT )
PCN = PC j = .P .e .(1 − e ).e . . (25)
R 1 − e−(γ +RT )
j=1

Present value of expected total production cost from N full cycles (EPCN), is given
by

∞ (N+1)T

EPCN = PCN. f (h) dh
N =0 NT
 
p0  RT e−λT
= .P .e .(1 − e−Rt2 ).e−(γ +RT ) . . (26)
R (1 − e−(γ +RT +λT ) )
j
Present value of ordering cost for the jth(1 ≤ j ≤ N ) cycle, C3 , is given by

C3 = {C3 + C3 .e−δ j }.e−R( j−1)T , C3 , C3 , δ > 0.

j
(27)

Present value of total ordering cost from N full cycles (TOCN), is given by
   

N
1 − e−N RT 1 − e−N (δ+RT )
j  −δ
TOCN = C3 = C3 + C3 .e . . (28)
1 − e−RT 1 − e−(δ+RT )
j=1

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Two-warehouse production model for deteriorating inventory items 267

Present value of expected total ordering cost from N full cycles (ETOCN), is given by

∞ (N+1)T
 C3 e−λT
ETOCN = TOCN. f (h) dh =
(1 − e−(λ+R)T )
N =0 NT
e−λT
+C3 .e−δ . . (29)
(1 − e−(δ+RT +λT ) )

Present value of sales revenue for the jth(1 ≤ j ≤ N ) cycle (SR j ), is given by

j T
α  −R( j−1)T 
SR j = m 0 . p0 .e−γ j D(t).e−Rt dt = m 0 . p0 .e−γ j e −e−R{( j−1)T +t1 }
R
( j−1)T

β(P  − α) 1  −R( j−1)T 
+ e − e−R{( j−1)T +t1 }
θ1 + β R
1  
+ e−(θ1 +β+R)t1 −R( j−1)T − e−R( j−1)T
θ1 + β + R
α + βW  −R{( j−1)T +t1 } 
+ e − e−R{( j−1)T +t3 }
R
α  −R{( j−1)T +t3 } 
+ e − e−R j T
R
  
αβ 1
+ e(θ1 +β)(T −t3 )−R{( j−1)T +t3 } − e−R j T
θ1 + β θ1 + β + R
1  −R{( j−1)T +t3 } 
− e − e−R j T . (30)
R

Present value of total sales revenue from N full cycles (SRN), is given by


N
α  β(P  − α)  1  
−γ −Rt1
SRN = S R j = m 0 . p0 .e 1−e + 1 − e−Rt1
R θ1 + β R
j=1

1   α + βW  
−(θ1 +β+R)t1
+ e −1 + e−Rt1 − e−Rt3
θ1 + β + R R
   
α −Rt3 αβ 1
+ e − e−RT + e(θ1 +β)(T −t3 )−Rt3
R θ1 + β θ1 + β + R
 
 1   1 − e −N (γ +RT )
−e−RT − e−Rt3 − e−RT . . (31)
R 1 − e−(γ +RT )

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268 D. Das et al.

Present value of expected total sales revenue from N full cycles (ESRN), is given by
(N+1)T
α   β(P  − α)
∞

ESRN = SRN. f (h) dh = m 0 . p0 .e−γ 1−e−Rt1 +
R θ1 + β
N =0 N T
     
1 1 α + βW  −Rt1 
× 1 − e−Rt1 + e−(θ1 +β+R)t1 − 1 + e − e−Rt3
R θ1 + β + R R

α  −Rt3  αβ 1  
+ e − e−RT + e(θ1 +β)(T −t3 )−Rt3 − e−RT
R θ1 + β θ1 + β + R
1  −Rt3   e−λT

− e − e−RT . . (32)
R (1 − e−(γ +RT +λT ) )

Appendix A.2: Calculation for expected sales revenue for last cycle

Case-I: ( N T < h ≤ N T + t1 )
Present value of holding cost of the inventory in OW for the last cycle (HCO L1 ) is
given by,
h
1  −N RT 

Cow (P − α)
HCO L1 = Cow q1 (t)e−Rt dt = e − e−Rh
θ1 + β R
NT
1 
+ e(θ1 +β)N T −(θ1 +β+R)h − e−N RT . (33)
θ1 + β + R
Present value of holding cost of the inventory in RW for the last cycle (HCR L1 ) is
given by,
HCR L1 = 0. (34)
Present value of production cost (PC L1 ) is given by,
h
p0 .e−γ (N +1) .P  −R N T 

−γ (N +1) 
PC L1 = p0 .e .P e−Rt dt = e − e−Rh . (35)
R
NT

Present value of ordering cost = {C3 + C3 .e−δ(N +1) }e−N RT .

Present value of sales revenue (SR L1 ) is given by,
h
−γ (N +1)
SR L1 = m 0 . p0 .e {α + βq1 (t)}e−Rt dt
NT

α  −R N T  P  − α 1  −R N T 
= m 0 . p0 .e−γ (N +1) e −e−Rh +β. e − e−Rh
R θ1 + β R
1  
+ e(θ1 +β)N T −(θ1 +β+R)h − e−R N T . (36)
θ1 + β + R

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Two-warehouse production model for deteriorating inventory items 269

Case-II: ( N T + t1 < h ≤ N T + t2 )
Present value of holding cost of the inventory in OW for the last cycle (HCO L2 ) is
given by,
⎡ ⎤
NT +t1 h
⎢ ⎥
HCO L2 = Cow ⎣ q1 (t)e−Rt dt + q1 (t)e−Rt dt ⎦
NT N T +t1

(P  − α) 1  −N RT 
= Cow e − e−R(N T +t1 )
θ1 + β R
1  
−(θ1 +β)t1 −R(N T +t1 ) −N RT
+ e −e
θ1 + β + R
W  θ1 (N T +t1 )−(θ1 +R)h 
− e − e−R(N T +t1 ) . (37)
θ1 + R
Present value of holding cost of the inventory in RW for the last cycle (HCR L2 ) is
given by,

h
P  − α − βW 1  −R(N T +t1 ) 
HCR L2 = Crw q2 (t)e−Rt dt = Crw . e − e−Rh
θ2 R
N T +t1
1  θ2 (N T +t1 )−(θ2 +R)h 
+ e − e−R(N T +t1 ) . (38)
θ2 + R

Present value of production cost (PC L2 ) is given by,

h
−γ (N +1)  p0 .e−γ (N +1) .P   −R N T 
PC L2 = p0 .e .P e−Rt dt = e − e−Rh . (39)
R
NT

Present value of ordering cost = {C3 + C3 .e−δ(N +1) }e−N RT .

Present value of sales revenue (SR L2 ) is given by,

⎡ ⎤
NT +t1 h
⎢ ⎥
SR L2 = m 0 . p0 .e−γ (N +1) ⎣ {α + βq1 (t)}e−Rt dt + (α + βW )e−Rt dt ⎦
NT N T +t1

α  −R N T  P − α
= m 0 . p0 .e−γ (N +1) e − e−R(N T +t1 ) + β.
R θ1 + β

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270 D. Das et al.

 
1  −R N T  1 
× e − e−R(N T +t1 ) + e−(θ1 +β)t1 −R(N T +t1 ) − e−R N T
R θ1 + β + R
1  −R(N T +t1 ) 
+(α + βW ) e − e−Rh . (40)
R

Case-III: (N T + t2 < h ≤ N T + t3 )
Present value of holding cost of the inventory in OW for the last cycle (HCO L3 ) is
given by,
⎡ ⎤
NT +t1 h
⎢ ⎥
HCO L3 = Cow ⎣ q1 (t)e−Rt dt + q1 (t)e−Rt dt ⎦
NT N T +t1

(P  − α) 1  −N RT 
= Cow e − e−R(N T +t1 )
θ1 + β R
1  
+ e−(θ1 +β)t1 −R(N T +t1 ) − e−N RT
θ1 + β + R
W  θ1 (N T +t1 )−(θ1 +R)h 
− e − e−R(N T +t1 ) . (41)
θ1 + R

Present value of holding cost of the inventory in RW for the last cycle (HCR L3 ) is
given by,
⎡ ⎤
Nt+t2 h
⎢ ⎥
HCR L3 = Crw ⎣ q2 (t)e−Rt dt + q2 (t)e−Rt dt ⎦
N T +t1 N T +t2

P  − α − βW 1  −R(N T +t1 ) 
= Crw e − e−R(N T +t2 )
θ2 R
1  
+ eθ2 (t1 −t2 )−R(N T +t2 ) − e−R(N T +t1 )
θ2 + R

α + βW 1  −Rh 
+ e − e−R(N T +t2 )
θ2 R
1  θ2 (N T +t3 )−(θ2 +R)h 
− e − eθ2 (t3 −t2 )−R(N T +t2 ) . (42)
θ2 + R

Present value of production cost (PC L3 ) is given by,

NT +t2
−γ (N +1)  p0 .e−γ (N +1) .P   −R N T 
PC L3 = p0 .e .P e−Rt dt = e − e−R(N T +t2 ) .
R
NT
(43)

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Two-warehouse production model for deteriorating inventory items 271

Present value of ordering cost= {C3 +C3 .e−δ(N +1) }e−N RT .

Present value of sales revenue (SR L3 ) is given by,

⎡
NT +t1
⎢
SR L3 = m 0 . p0 .e−γ (N +1) ⎣ {α + βq1 (t)}e−Rt dt
NT
⎤
NT +t2 h
⎥
+ (α + βW )e−Rt dt + (α + βW )e−Rt dt ⎦
N T +t1 N T +t2
 
α  −R N T  P − α 1  −R N T


= m 0 . p0 .e−γ (N +1) e −e −R(N T +t 1 ) + β. e

R θ1 + β R
 1  
−e−R(N T +t1 ) + e−(θ1 +β)t1 −R(N T +t1 ) − e−R N T
θ1 + β + R

α + βW  −R(N T +t1 ) −R(N T +t )
 α + βW 
−R(N T +t ) −Rh

+ e −e 2 + e 2 −e .
R R
(44)

Case-IV: (N T + t3 < h ≤ (N + 1)T )

Present value of holding cost of the inventory in OW for the last cycle (HCO L4 ) is
given by,

⎡ ⎤
NT +t1 NT +t3 h
⎢ ⎥
HCO L4 = Cow ⎣ q1 (t)e−Rt dt + q1 (t)e−Rt dt + q1 (t)e−Rt dt ⎦
NT N T +t1 N T +t3

(P  − α) 1  −N RT 
= Cow e − e−R(N T +t1 )
θ1 + β R
1  
+ e−(θ1 +β)t1 −R(N T +t1 ) − e−N RT
θ1 + β + R
W  θ1 (t1 −t3 )−R(N T +t3 ) 
− e − e−R(N T +t1 )
θ1 + R
  
α 1 −Rh
+ e − e−R(N T +t3 )
θ1 + β R
1  
− e(θ1 +β)(N +1)T −(θ1 +β+R)h − e(θ1 +β)(T −t3 )−R(N T +t3 ) .
θ1 + β + R
(45)

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272 D. Das et al.

Present value of holding cost of the inventory in RW for the last cycle (HCR L4 ) is
given by,

⎡ ⎤
Nt+t2 NT +t3
⎢ ⎥
HCR L4 = Crw ⎣ q2 (t)e−Rt dt + q2 (t)e−Rt dt ⎦
N T +t1 N T +t2

− βW 1  −R(N T +t1 )
P − α 
= Crw e − e−R(N T +t2 )
θ2 R
1  
+ eθ2 (t1 −t2 )−R(N T +t2 ) − e−R(N T +t1 )
θ2 + R

α + βW 1  θ2 (t3 −t2 )−R(N T +t2 ) 
+ e − e−R(N T +t3 )
θ2 θ2 + R

1 −R(N T +t3 ) 
+ e − e−R(N T +t2 ) . (46)
R

Present value of production cost (PC L4 ) is given by,

NT +t2
−γ (N +1)  p0 .e−γ (N +1) .P   −R N T 
PC L4 = p0 .e .P e−Rt dt = e − e−R(N T +t2 ) .
R
NT
(47)

Present value of ordering cost = {C3 +C3 .e−δ(N +1) }e−N RT .

Present value of sales revenue (SR L4 ) is given by,

⎡
NT +t1 NT +t3
−γ (N +1) ⎢ −Rt
SR L4 = m 0 . p0 .e ⎣ {α + βq1 (t)}e dt + (α + βW )e−Rt dt
NT N T +t1
⎤
h
⎥
+ {α + βq1 (t)}e−Rt dt ⎦
N T +t3

α  −R N T  P  − α 1  −R N T
= m 0 . p0 .e−γ (N +1) e − e−R(N T +t1 ) + β. e
R θ1 + β R
 1  
−e−R(N T +t1 ) + e−(θ1 +β)t1 −R(N T +t1 ) − e−R N T
θ1 + β + R
α + βW  −R(N T +t1 )  α  
+ e − e−R(N T +t3 ) + e−R(N T +t3 ) − e−Rh
R R
   
αβ 1 −Rh 1
+ e − e−R(N T +t3 ) − e(θ1 +β)(N +1)T −(θ1 +β+R)h
θ1 + β R θ1 + β + R

−e(θ1 +β)(T −t3 )−R(N T +t3 ) . (48)

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Two-warehouse production model for deteriorating inventory items 273

Present value of expected holding cost (EHCO L ) in OW for the last cycle is given by,

∞ (N+1)T

EHCO L = HCO L . f (h)dh
N =0 NT
= EHCO L1 + EHCO L2 + EHCO L3 + EHCO L4 . (49)

where

∞ NT +t1
 Cow .(P  − α) 1  
EHCO L1 = HCO L1 . f (h)dh = 1 − e−λt1
θ1 + β R
N =0 NT
λ   1

λ
− 1 − e−(λ+R)t1 +
R+λ (θ1 + β + R) θ1 + β + R + λ
    1
× 1 − e−(θ1 +β+λ+R)t1 − 1 − e−λt1 . . (50)
1 − e−(λ+R)T
∞ NT +t2
  
 P − α 1  −λt1 
EHCO L2 = HCO L2 . f (h)dh = Cow e − e−λt2
θ1 + β R
N =0 N T +t
1

1  −Rt1 −λt2 
+ e − e−(λ+R)t1
R
1  
+ e−(θ1 +β+λ+R)t1 − e−(θ1 +β+R)t1 −λt2
θ1 + β + R
1  
+ e−λt2 − e−λt1
θ1 + β + R
  
Wλ 1
− e−(λ+R)t1 − eθ1 (t1 −t2 )−(λ+R)t2
θ1 + R θ1 + λ + R

1  −(Rt1 +λt2 )  1
+ e − e−(λ+R)t1 . . (51)
λ 1 − e−(λ+R)T

∞ NT +t3  
1  −λt2 

 P −α
EHCO L3 = HCO L3 . f (h)dh = Cow e − e−λt3
θ1 + β R
N =0 N T +t
2

1  −Rt1 −λt3 
+ e − e−λt2 −Rt1
R
1  
+ e−(θ1 +β+R)t1 −λt2 − e−(θ1 +β+R)t1 −λt3
θ1 + β + R
1   W

λ 
+ e−λt3 − e−λt2 − eθ1 (t1 −t2 )−(λ+R)t2
θ1 + β + R θ1 + R θ1 + λ + R

   1
−e θ1 (t 1 −t 3 )−(λ+R)t 3 + e −(Rt 1 +λt 3 ) −e −(Rt 1 +λt 2 ) . .
1−e −(λ+R)T

(52)

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274 D. Das et al.

and

(N+1)T  
1  −λt3 
∞
 
P −α
EHCO L4 = HCO L4 . f (h)dh = Cow e − e−λT
θ1 + β R
N =0 N T +t
3

1  −Rt1 −λT 
+ e − e−λt3 −Rt1
R
1  
+ e−(θ1 +β+R)t1 −λt3 − e−(θ1 +β+R)t1 −λT
θ1 + β + R
1  
+ e−λT − e−λt3
θ1 + β + R
W   
− eθ1 (t1 −t3 )−(λ+R)t3 − eθ1 (t1 −t3 )−(λT +Rt3 ) + e−(Rt1 +λT )
θ1 + R
    1 
α λ
−e−(Rt1 +λt3 ) + e−(λ+R)t3 − e−(λ+R)T + e−(Rt3 +λT )
θ1 + β R(λ + R) R
 λ  
−e−(Rt3 +λt3 ) + e−(λ+R)T − e(θ1 +β)(T −t3 )−(λ+R)t3
(θ1 + β + R)(θ1 + β + λ + R)

1  
− e(θ1 +β)(T −t3 )−Rt3 −λT − e(θ1 +β)(T −t3 )−Rt3 −λt3
θ1 + β + R

1
· . (53)
1 − e−(λ+R)T

Present value of expected holding cost (EHCR L ) in RW for the last cycle is given by,

∞ (N+1)T

EHCR L = HCR L . f (h)dh
N =0 NT
= EHCR L1 + EHCR L2 + EHCR L3 + EHCR L4 . (54)

where

∞ NT +t1

EHCR L1 = HCR L1 . f (h)dh = 0. (55)
N =0 NT
∞ NT +t2

EHCR L2 = HCR L2 . f (h)dh
N =0 N T +t
1

P − α − βW 1  −(λ+R)t1 


= Crw e − e−(Rt1 +λt2 )

θ2 R
λ  
+ e−(λ+R)t2 − e−(λ+R)t1
R(λ + R)

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Two-warehouse production model for deteriorating inventory items 275

λ  
− eθ2 (t1 −t2 )−(λ+R)t2 − e−(λ+R)t1
(θ2 + R)(θ2 + λ + R)
1  −(Rt1 +λt2 )  1
+ e − e−(λ+R)t1 . −(λ+R)T
. (56)
θ2 + R 1−e
∞ NT +t3

EHCR L3 = HCR L3 . f (h)dh
N =0 N T +t
2
 
1  −(Rt1 +λt2 ) 

P − α − βW
= Crw e − e−(Rt1 +λt3 )
θ2 R

1  −(Rt2 +λt3 ) 
+ e − e−(λ+R)t2
R
1  θ2 (t1 −t2 )−(Rt2 +λt3 ) 
− e − eθ2 (t1 −t2 )−(R+λ)t2
θ2 + R
1  −(Rt1 +λt3 ) 
+ e − e−(Rt1 +λt2 )
θ2 + R
  
α + βW λ
+ e−(λ+R)t2 − e−(λ+R)t3
θ2 R(λ + R)

1 −(Rt2 +λt3 ) 
+ e − e−(R+λ)t2
R
λ  
+ e−(λ+R)t3 − eθ2 (t3 −t2 )−(λ+R)t2
(θ2 + R)(θ2 + λ + R)

1  θ2 (t3 −t2 )−(Rt2 +λt3 )  1
− e −e θ2 (t 3 −t 2 )−(λ+R)t 2 . .
θ2 + R 1−e −(λ+R)T

(57)

and

EHCR L4
∞ (N+1)T

= HCR L4 . f (h)dh
N =0 N T +t
3
 
1  −(Rt1 +λt3 ) 

P − α − βW
= Crw e − e−(Rt1 +λT )
θ2 R

1 −(Rt2 +λt3 )  1  θ2 (t1 −t2 )−(Rt2 +λt3 ) 
− e − e−(λT +Rt2 ) + e − eθ2 (t1 −t2 )−(Rt2 +λT
R θ2 + R
1  −(Rt1 +λt3 )  α + βW  1 
−(Rt1 +λT )
− e −e + eθ2 (t3 −t2 )−(Rt2 +λt3 )
θ2 + R θ2 θ2 + R
 1  −(R+λ)t3  1 
−eθ2 (t3 −t2 )−(λT +Rt2 ) − e − e−(Rt3 +λT ) + e−(λ+R)t3
θ2 + R R

 1   1
−(λT +Rt3 ) −(Rt2 +λt3 ) −(Rt2 +λT )
−e − e −e . −(λ+R)T
. (58)
R 1−e

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276 D. Das et al.

Present value of expected production cost (EPC L ) for the last cycle is given by,

∞ (N+1)T

EPC L = PC L . f (h)dh
N =0 NT

λ  −(R+λ)t2 

p0 .e−γ .P !
= 1 − e−λt2 + e −1
R R+λ

    1
+ 1 − e−Rt2 . e−λt2 −e −λT
. −(RT +λT +γ ) )
. (59)
(1 − e

Present value of expected sales revenue (ESR L ) from the last cycle is given by,

∞ (N+1)T

ESR L = S R L . f (h)dh
N =0 NT
= ESR L1 + ESR L2 + ESR L3 + ESR L4 . (60)

where

NT +t1
∞
 α ! αλ  
ESR L1 = SR L1 . f (h)dh = m 0 . p0 .e−γ . 1 − e−λt1 + e−(R+λ)t1 − 1
R R(λ + R)
N =0 NT
   
β(P − α) 1 ! λ
+ 1 − e−λt1 + e−(R+λ)t1 − 1
θ1 + β R R(λ + R)
λ  
+ 1 − e−(θ1 +β)t1 −(R+λ)t1
(θ1 + β + R)(θ1 + β + λ + R)

1 ! 1
+ e−λt1 − 1 . , (61)
θ1 + β + R (1 − e−(RT +λT +γ ) )
NT +t2
∞
 α −λt1 ! α  −(Rt +λt )
ESR L2 = SR L2 . f (h)dh = m 0 . p0 .e−γ . e − e−λt2 + e 1 2
R R
N =0 N T +t
1
 β(P  − α)  1 ! 1  −(Rt +λt ) 
−e−(R+λ)t1 + e−λt1 − e−λt2 + e 1 2 − e −(R+λ)t1
θ1 + β R R
1  
+ e−(θ1 +β)t1 −(R+λ)t1 − e−(θ1 +β)t1 −(Rt1 +λt2 )
θ1 + β + R

1 ! α + βW  −(Rt1 +λt2 ) 
+ e−λt2 − e−λt1 − e − e−(R+λ)t1
θ1 + β + R R
λ(α + βW )  −(R+λ)t2  1
+ e − e−(R+λ)t1 . , (62)
R(λ + R) (1 − e−(RT +λT +γ ) )

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Two-warehouse production model for deteriorating inventory items 277

NT +t3
∞
 α −λt2 ! α  −(Rt +λt )
ESR L3 = SR L3 . f (h)dh = m 0 . p0 .e−γ . e − e−λt3 + e 1 3
R R
N =0 N T +t
2
 β(P  − α)  1 ! 1  −(Rt +λt ) 
−e−(Rt1 +λt2 ) + e−λt2 − e−λt3 + e 1 3 − e −(Rt1 +λt2 )
θ1 + β R R
1  
+ e−(θ1 +β)t1 −(Rt1 +λt2 ) − e−(θ1 +β)t1 −(Rt1 +λt3 )
θ1 + β + R

1 ! α + βW  −(Rt1 +λt3 ) 
+ e−λt3 − e−λt2 − e − e−(Rt1 +λt2 )
θ1 + β + R R
λ(α + βW )  −(R+λ)t3  1
+ e − e−(R+λ)t2 . , (63)
R(λ + R) (1 − e−(RT +λT +γ ) )

and

(N+1)T
α  −λt3  α 
∞

ESR L4 = SR L4 . f (h)dh = m 0 . p0 .e−γ . e − e−λT + e−(Rt1 +λT )
R R
N =0 N T +t
3

 β(P  − α)  1   1  
−e−(Rt1 +λt3 ) + e−λt3 − e−λT + e−(Rt1 +λT ) − e−(Rt1 +λt3 )
θ1 + β R R
1   1 
+ e−(θ1 +β)t1 −(Rt1 +λt3 ) − e−(θ1 +β)t1 −(Rt1 +λT ) + e−λT
θ1 + β + R θ1 + β + R
!" α + βW  −(Rt +λT )  α + βW  
−e−λt3 − e 1 − e−(Rt1 +λt3 ) + e−(Rt3 +λT ) − e−(R+λ)t3
R R

α −(Rt3 +λT )  λα  
− e − e−(R+λ)t3 + e−(R+λ)T − e−(R+λ)t3
R R(λ + R)
   1  
αβ λ
+ e−(R+λ)t3 − e−(R+λ)T + e−(Rt3 +λT ) − e−(R+λ)t3
θ1 + β R(λ + R) R
λ  
+ e−(λ+R)T − e(θ1 +β)(T −t3 )−(R+λ)t3
(θ1 + β + R)(θ1 + β + λ + R)
1   1
− e(θ1 +β)(T −t3 )−(Rt3 +λT ) − e(θ1 +β)(T −t3 )−(R+λ)t3 .
θ1 + β + R (1 − e−(RT +λT +γ ) )
(64)

Present value of expected ordering cost (EOC L ) for the last cycle is given by,

(N+1)T
∞
 
EOC L = C3 + C3 .e−δ(N +1) .e−N RT f (h)dh
N =0 NT
(1 − e−λT )  −δ (1 − e−λT )
= C3 + C .e . . (65)
(1 − e−(λ+R)T ) 3
(1 − e−(δ+λT +RT ) )

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278 D. Das et al.

Present value of expected reduced selling price (ERSP L ) from the last cycle is given
by,

ERSP L = ERSP L1 + ERSP L2 + ERSP L3 + ERSP L4 . (66)

where

∞ NT +t1

−γ (N +1)
ERSP L1 = m 1 p0 e e−Rh .q1 (h). f (h)dh
N =0 NT

1  

m 1 p0 e−γ λ(P − α)
= 1 − e−(R+λ)t1
θ1 + β R+λ
1   1
− 1 − e−(θ1 +β+λ+R)t1 . , (67)
θ1 + β + λ + R 1 − e +RT +λT )
−(γ

and

∞ NT +t2

−γ (N +1)
ERSP L2 = m 1 p0 e e−Rh .{W + q2 (h)}. f (h)dh
N =0 N T +t1

W  −(R+λ)t1 
= m 1 p0 λe−γ e − e−(R+λ)t2
λ+ R

1  −(R+λ)t1 

P − α − βW
+ e − e−(R+λ)t2
θ2 λ+ R
1   1
θ2 (t1 −t2 )−(λ+R)t2 −(λ+R)t1
+ e −e . ,
θ2 + λ + R 1 − e−(γ +RT +λT )
(68)
∞ NT +t3

ERSP L3 = m 1 p0 e−γ (N +1) e−Rh .{W + q2 (h)}. f (h)dh
N =0 N T +t2

W  −(R+λ)t2 
= m 1 p0 λe−γ e − e−(R+λ)t3
λ+ R

α + βW 1  −(R+λ)t3 
+ e − e−(R+λ)t2
θ2 λ+ R
1   1
+ eθ2 (t3 −t2 )−(λ+R)t2 − e−(λ+R)t3 . ,
θ2 + λ + R 1 − e−(γ +RT +λT )
(69)

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Two-warehouse production model for deteriorating inventory items 279

and

∞ (N+1)T

−γ (N +1)
ERSP L4 = m 1 p0 e e−Rh .q1 (h). f (h)dh
N =0 N T +t3

m 1 p0 λ α.e−γ 1  
= e(θ1 +β)(T −t3 )−(R+λ)t3 − e−(R+λ)T
θ1 + β θ1 + β + λ + R
1  −(R+λ)T  1
+ e − e−(R+λ)t3 . . (70)
λ+ R 1 − e−(γ +RT +λT )

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