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deteriorating inventory models under inflation via

particle swarm optimisation

To cite this article: A.K. Bhunia, A.A. Shaikh & R.K. Gupta (2015) A study on two-warehouse

partially backlogged deteriorating inventory models under inflation via particle swarm optimisation,

International Journal of Systems Science, 46:6, 1036-1050, DOI: 10.1080/00207721.2013.807385

https://www.tandfonline.com/action/journalInformation?journalCode=tsys20

International Journal of Systems Science, 2015

Vol. 46, No. 6, 1036–1050, http://dx.doi.org/10.1080/00207721.2013.807385

via particle swarm optimisation

A.K. Bhuniaa , A.A. Shaikha,∗ and R.K. Guptab

a

Department of Mathematics, The University of Burdwan, Burdwan, West Bengal, India; b Department of Commerce and Management,

West Bengal State University, Barasat, Kolkata, West Bengal, India

(Received 19 October 2012; final version received 10 May 2013)

This paper deals with a deterministic inventory model for linear trend in demand under inflationary conditions with different

rates of deterioration in two separate warehouses (owned and rented warehouses). The replenishment rate is infinite. The stock

is transferred from the rented warehouse to owned warehouse in continuous release pattern and the associated transportation

cost is taken into account. At owned warehouse, shortages, if any, are allowed and partially backlogged with a rate dependent

on the duration of waiting time up to the arrival of the next lot. The corresponding problems have been formulated as nonlinear

constrained optimisation problems for two different policies (inventory follows shortage (IFS) and shortage follows inventory

(SFI)). Finally, the model has been illustrated with a numerical example and to study the effects of changes of different

system parameters on initial stock level, maximum shortage level and cycle length with the minimum cost of the system,

sensitivity analyses have been carried out by changing one parameter at a time and keeping the others at their original values.

Keywords: inventory; two-warehouse; deterioration; partial backlogging; inflation; time-dependent demand

In the present-day competitive business situation, the retail- and common tradition to assume the inventory holding and

ers as well as wholesalers are bound to place an order for deterioration costs to be higher in RW than those in OW.

purchasing of an item in excess of the owned warehouse As a result, the inventory management stores goods in OW

capacity due to various reasons, namely price discount for before RW, but consumes the stocks of RW at the earli-

bulk purchase, limited capacity of owned warehouse in an est, i.e. before consuming the stocks of OW. In this area,

important market place, higher re-ordering cost, seasonal a number of researchers has developed different types of

product, inflation-induced demand, etc. Such a situation two warehouse inventory models considering realistic sit-

creates the necessity for hiring an additional storage space uations. The major assumptions in the existing works have

to store the excess units purchased. This additional stor- been summarised in Table 1.

age space is typically a rented warehouse. According to Past few decades have witnessed various research works

market economy, inflation plays an important and signifi- being done on the replenishment problem for deteriorating

cant role in business. It increases the cost of goods as well items such as seasonal products, volatile liquids, medicines,

as other costs. To safeguard from this rising prices during perfumes, etc. An inventory model with a constant deterio-

the inflation regime, generally an organisation prefers to ration rate was first proposed by Ghare and Schrader (1963).

keep a higher inventory, thereby increasing the aggregate With the consideration of a variable deterioration rate, this

demand. It requires additional storage space which is fa- model was further extended and modified by Covert and

cilitated by a rented warehouse. Two-warehouse inventory Philip (1973). Shah (1977) proposed a generalised eco-

problems have consistently gained importance and drawn nomic order quantity (EOQ) model with a variable deterio-

the attention of world-wide researchers during the past few ration rate and the allowance of the complete backlogging

decades. Reasons such as meeting the demand of seasonal of the unsatisfied demand. After a few years, a nonshortage

products, enjoying discounts for bulk purchase, etc. have inventory model for deteriorating items with time-

necessitated the purchase of goods in excess of the capac- proportional demand was proposed by Sachan (1984). Since

ity of owned warehouse (OW). For storing these quantities, then several researchers such as Datta and Pal (1988),

reconstructing a new warehouse being a much expensive Aggarwal and Jaggi (1989), Shiue (1990), Hariga and

option, the inventory managers generally resort to a rented Benkherouf (1994), Hariga (1995), Chakrabarti and

warehouse (RW). Due to factors such as shifting of goods, Chaudhuri (1997), Teng, Chern, Yang, and Wang (1999),

∗

Corresponding author. Email: aakbardil@rediffmail.com

C 2013 Taylor & Francis

International Journal of Systems Science 1037

Permissible Inventory

Author(s) and year Warehouses Deterioration Demand rate Inflation shortage policies

Sarma (1983) Two No Constant No No –

Sarma (1987) Two Yes Constant No Complete IFS

backlogging

Goswami and Chaudhuri Two No Linearly time No No –

(1992) dependent

Pakkala and Achary (1992) Two Yes Constant No Complete IFS

backlogging

Bhunia and Maiti (1994) Two No Linearly time No Complete IFS

dependent backlogging

Benkherouf (1997) Two Yes Time and stock No Complete IFS

dependent backlogging

Bhunia and Maiti (1998) Two Yes Linearly time No Complete IFS

dependent backlogging

Zhou (1998) Two Yes Time- No No –

dependent

Kar, Bhunia, and Maiti (2001) Two Yes Linearly time No Complete IFS

dependent backlogging

Zhou and Yang (2003) Two Yes Inventory level No No –

dependent

Yang (2004) Two Yes Constant Yes Complete IFS

backlogging

Yang (2006) Two Yes Constant Yes Partial IFS and SFI

backlogging

Lee (2006) Two Yes Constant No Complete IFS

backlogging

Chung and Huang (2007) Two Yes Constant No No –

Das, Maity, and Maiti (2007) Two No Inventory level No No –

dependent

Dey et al. (2008) Two No Dynamic Yes No –

Hsieh et al. (2008) Two Yes Constant Yes Complete IFS

backlogging

Niu and Xie (2008) Two Yes Constant No Complete IFS

backlogging

Rong, Mahapatra, and Maiti Two Yes Selling price No Partial and IFS

(2008) dependent complete

backlogging

Jaggi et al. (2011) Two and single Yes Linearly time Yes Partial IFS

dependent backlogging

Liang and Zhou (2011) Two Yes Constant No No –

Yang (2012) Two Yes Constant Yes Partial IFS and SFI

backlogging

Yang and Chang (2013) Two Yes Constant Yes Partial SFI

backlogging

Present paper Two and single Yes Linearly time Yes Partial IFS and SFI

dependent backlogging

Teng, Yang, and Ouyang (2003), Wee (1999), Papachristos effect of inflation and time value of money was developed

and Skouri (2000, 2003), Taleizadeh, Wee, and Jolai (2013) by Bierman and Thomas (1977). Misra (1979) developed an

and others have explored the different aspects of inventory inventory model with the assumption of different inflation

management for deteriorating items. rates for different associated costs and constant demand.

Apart from the rate of deterioration, other practically Vrat and Padmanabhan (1990) developed an EOQ model

important factors, which have been widely accepted by the for items with stock-dependent consumption rate and expo-

researchers to have crucial impact on the inventory policy nential decay. Datta and Pal (1991) proposed an inventory

decisions, are inflation and time value of money. Buzacott model with linear time-dependent demand rate and short-

(1975) and Misra (1979) proposed inventory models with ages by considering the effects of inflation and time value

the consideration of inflation for all the associated costs. Af- of money. Wee and Law (1999, 2001) developed inven-

ter two years, an EOQ model with the incorporation of the tory models for deteriorating items by taking into account

1038 A.K. Bhunia et al.

such as Yang, Teng, and Chern (2001), Yang (2004, 2006), (1) Replenishment rate is infinite and lead time is

Jaggi, Aggarwal, and Goel (2006), Hsieh, Dye, and Ouyang constant.

(2008), Dey, Mondal, and Maiti (2008), Jaggi, Khanna, and (2) The OW has a limited capacity, whereas the RW

Verma (2011) and others have also contributed to this field has unlimited capacity.

of research. (3) The inventory costs (including holding cost and

Yang (2004) proposed a two-warehouse inventory deterioration cost) in RW are higher than those in

model with a constant demand rate for deteriorating items OW.

under inflation by considering two alternative situations. (4) The entire lot is delivered in one batch.

In the first situation, he assumed a model which starts (5) The inventory planning horizon is infinite and the

with an instant order and ends with shortages. In the inventory system involves only one item.

second situation, the model begins with shortages and (6) Deterioration is considered only after the quantities

ends without shortages. These models were extended by are stored in the warehouse. There is neither repair

Yang (2006) with the incorporation of partial backlog- nor replacement of the deteriorated units during the

ging. Considering partial backlogging, Taleizadeh, Niaki, inventory cycle.

and Makui (2012) and Taleizadeh, Pentico, Jabalameli, and (7) Shortages, if any, are allowed and unsatisfied de-

Aryanezhad (2013a, b) developed single-warehouse inven- mand is partially backlogged. During the shortage

tory models. Jaggi et al. (2011) proposed an inventory period, the backlogging rate is dependent on the

model considering a linear time-dependent demand rate for length of waiting time up to the arrival of the fresh

deteriorating items, inflation and partial backlogging rate lot. This rate is denoted by γ (t) which is a dif-

in a two-warehouse system. Recently, Yang (2012) devel- ferentiable and decreasing function of time t with

oped two-warehouse partial backlogging inventory models 0 ≤ γ (t) ≤ 1, γ (0) = 1 and limt→∞ γ (t) = 0. It

with three-parameter Weibull distribution deterioration un- is to be noted that if γ (t) = 1 for all t, then short-

der inflation. On the other hand, Yang and Chang (2013) ages are completely backlogged.

proposed a two-warehouse inventory model for deteriorat-

ing items with permissible delay in payment under inflation.

In this paper, a deterministic inventory model for linear

trend in demand under inflationary conditions with differ-

ent deterioration rates in two separate warehouses (RW and Notations:

OW) considering two different policies (inventory follows f (t) The demand rate which is a linear function

shortage (IFS) and shortage follows inventory (SFI)) has of t, i.e. f (t) = a + bt where a > 0, b ≥ 0

been studied. The replacement rate is infinite. The stocks in S Highest stock level at the beginning of stock-

RW are transferred to OW in a continuous release pattern in period

and the associated transportation cost is taken into account. R Maximum shortage level

In OW, shortages, if any, are allowed and partially back- L1 -system Single-warehouse system

logged with a rate dependent on the duration of the waiting L2 -system Two-warehouse system

time up to the arrival of the next lot. The corresponding W Storage capacity of OW

problems have been formulated as nonlinear constrained γ (t) Backlogging rate which is a function of wait-

optimisation problems which have been solved by an effi- ing time t

cient soft computing method, viz. particle swarm optimisa- α, β Deterioration rates in OW and RW, respec-

tion (PSO). Finally, to illustrate the model, we have solved tively (0 < α, β 1)

a numerical example with different demands and partially r Rate of inflation

backlogging rates. Finally, to study the effect of changes Co Replenishment cost per order

of different system parameters on initial stock level, max- Cp Purchasing cost per unit

imum shortage level and cycle length with the minimum Cho Holding cost per unit per unit time in OW

cost of the system, sensitivity analyses have been carried Chr Holding cost per unit per unit time in RW

out by changing one parameter at a time and keeping the Cb Backlogging cost per unit per unit time

others at their original values. Cls Unit opportunity cost due to lost sale

TC2 Present value of the total relevant cost per

unit time in two-warehouse models

TC1 Present value of the total relevant cost per

2. Assumption and notations unit time in single-warehouse models

The following assumptions and notations have been used in TCW Boundary cost for single-warehouse systems

developing the mathematical model of the two-warehouse Io (t) , Ir (t) Inventory levels in OW and RW, respectively,

inventory system. at time t

International Journal of Systems Science 1039

zero in RW

to Time at which the inventory level reaches to

zero in OW

ts Time at which the shortage level reaches to

the lowest point in the replenishment cycle

T Cycle length

IFS Inventory follows shortage

SFI Shortage follows inventory

p_size Population size

m_gen Maximum number of generation

χ Constriction factor

c1 (> 0) Cognitive learning rate

c2 (> 0) Social learning rate

r1 , r2 Uniformly distributed random numbers lying

in the interval [0, 1].

(k) Figure 1. Graphical representation of two-warehouse inventory

vi Velocity of ith particle at kth generation/

iteration system with IFS policy.

(k)

xi Position of ith particle of population at kth

generation which are disposed continuously as they come to the selling

(k)

pi Best previous position of ith particle at kth point. Hence, the inventory level Ir (t) at RW satisfies the

generation following differential equation:

(k)

pg Position of the best particle among all the

particles in the population

Ir (t) + βIr (t) = −f (t) , 0 ≤ t ≤ tr (1)

3. Two-warehouse model with IFS policy

In IFS policy, the inventory cycle starts with an instant or-

Ir (t) = 0 at t = tr . (2)

der and ends with shortages. The corresponding model is

a traditional model. In this model, initially, an enterprise

purchases S + R units of item. Then after fulfilling par- Again,

tially backlogged quantities, the on-hand inventory level

is S units. Out of these S units, W units are kept in OW Ir (t) = S − W at t = 0. (3)

and the rest S − W units are stored in RW. During the

time interval 0 ≤ t ≤ tr , the inventory level S − W units

in RW decreases for meeting up the customers’ demand Using (2), the solution of (1) is given by

and deterioration effect of an item and it reaches to zero

at t = tr . In OW, the inventory level W decreases during tr

the time interval 0 ≤ t ≤ tr due to deterioration only and Ir (t) = exp (−βt) exp (βt) f (t) dt, 0 ≤ t ≤ tr .

t

during tr ≤ t ≤ ts due to both demand and deterioration. (4)

At time t = to , the inventory level in OW reaches to zero. Again from (3) and (4), we have

Thereafter, shortages are allowed to occur during the time

interval to < t ≤ ts with a rate of γ (ts − t). At time t = ts tr

(= T), the maximum shortage level is R. This entire cycle S=W+ exp (βt) f (t) dt. (5)

then repeats itself after the cycle length ts with the changed 0

is to determine the optimal values of tr , to and ts such Again the inventory level Io (t) at OW during the time inter-

that the average cost of the system is minimised and also val 0 ≤ t ≤ ts satisfies the differential equations as follows:

to obtain the corresponding values of S and R. The pic-

torial representation of inventory situation is depicted in Io (t) + αIo (t) = 0, 0 ≤ t ≤ tr , (6)

Figure 1.

The stock depletion at RW during the time interval Io (t) + αIo (t) = −f (t) , t r < t ≤ to , (7)

0 ≤ t ≤ tr is mainly for meeting up the demand by the cus-

tomers and partly due to deterioration effect of the items Io (t) = −γ (ts − t) f (t) , to < t ≤ ts (= T ), (8)

1040 A.K. Bhunia et al.

ts

subject to the conditions

Cls e−rts [1 − γ (ts − t)] f (t) dt,

to

Io (t) = W at t = 0, (9)

respectively.

Io (t) = 0 at t = to (10) Now the amounts of deteriorated units in both the RW

and OW during the time interval 0 ≤ t ≤ to are

and

tr to

β Ir (t) dt and α Io (t) dt,

Io (t) = −R at t = ts (= T ). (11) 0 0

Using conditions (9)–(11), the solutions of differential Again the present value of the cost for deteriorated units

equations (6)–(8) are given by is

tr to

−rt −rt

Io (t) = W exp (−αt) , 0 ≤ t ≤ tr , (12) Cp β e Ir (t) dt + α e Io (t) dt .

0 0

to

= exp (−αt) exp (αt) f (t) dt, tr < t ≤ to , Hence, the present value of the total relevant cost per

t

(13) unit time during the cycle 0 ≤ t ≤ ts is given by

ts

tr

=R+ γ (ts − t) f (t) dt to < t ≤ ts (= T ). TC2 (to , ts ) = Co + Chr e−rt Ir (t) dt

t 0

(14)

to ts

−rt

+ Cho e Io (t) dt + Cb e−rt

Now using the continuity of Io (t) at time t = tr , we have 0 to

ts

to × R+ γ (ts − u) f (u) du dt

W = exp (αt) f (t) dt. (15) t

tr ts

+ Cls e−rts {1 − γ (ts − t)} f (t) dt

Again from the continuity of Io (t) at t = to , we have to

tr

ts + Cp β e−rt Ir (t) dt

R=− γ (ts − t) f (t) dt. (16) 0

to to

+α e−rt Io (t) dt T. (17)

Now the cumulative inventories in RW during 0 ≤ t ≤ tr 0

and OW during 0 ≤ t ≤ to are

Hence, our problem is to determine the optimal val-

tr to

ues of to and ts by solving the following highly nonlinear

Ir (t) dt and Io (t) dt,

0 0 optimisation problem:

(18)

The present values of the inventory holding costs in RW subject to ts > to and to > 0.

and OW are

This is a highly nonlinear optimisation problem with

tr to

−rt −rt two decision variables to and ts .

Chr e Ir (t) dt and Cho e Io (t) dt,

0 0

On the other hand, the present values of the backlogging At time t = 0, an enterprise purchases S + R units of

cost and the opportunity cost due to lost sale are item. Then after fulfilling partially backlogged quantities,

the on-hand inventory level is S units. By the time to , the

ts ts inventory level reaches to zero due to the combined effect of

Cb e−rt R + γ (ts − u) f (u) du dt and demand and deterioration and thereafter the shortages start

to t

to accumulate and continue up to ts with a rate of γ (ts − t).

International Journal of Systems Science 1041

This entire cycle then repeats itself after the cycle length Io (t) = −γ (ts − t)f (t), to < t ≤ ts (= T ), (27)

ts . The objective of this model is to determine the optimal

values of to and ts such that the average cost of the system subject to the conditions

is minimised and also to obtain the corresponding values

of S and R. The inventory level Io (t) at OW during the Io (t) = W at t = 0, (28)

time interval 0 ≤ t ≤ ts satisfies the differential equations

as follows: Io (t) = 0 at t = to (29)

subject to the conditions

Again Io (t) is continuous at t = to .

In this case, the present value of the total relevant cost

Io (t) = S at t = 0, (21)

per unit time can be obtained as follows:

Io (t) = 0 at t = to (22) to

and TCW ( ts ) = Co + Cho e−rt Io (t) dt

0

Io (t) = −R at t = ts (= T ). (23) ts ts

−rt

+ Cb e R+ γ (ts − u) f (u) du dt

Again Io (t) is continuous at t = to . to

ts

t

In this case, the present value of the total relevant cost + Cls e−rts {1 − γ (ts − t)} f (t) dt

per unit time can be obtained as follows: to

to

to + Cp α e−rt Io (t) dt T. (31)

TC1 (to , ts ) = Co + Chol e−rt Io (t) dt 0

0

ts ts

In this case, the corresponding optimisation problem is

+ Cb e−rt R + γ (ts − u) f (u) du dt given by

to t

ts

+ Cls e−rts {1 − γ (ts − t)} f (t) dt Minimise TCW (ts )

to (32)

to subject to ts > to and to > 0.

+ Cp α e−rt Io (t) dt T. (24)

0 This is a highly nonlinear optimisation problem with a

single decision variable ts .

In this case the corresponding optimisation problem is

given by

5. Two-warehouse model with SFI policy

Minimise TC1(to , ts ) In this policy, the inventory cycle begins with shortage

(25)

subject to ts > to and to > 0. and ends without shortage. Initially (i.e. at time t = 0),

shortages start to occur with a rate of γ (ts − t) and continue

This is a highly nonlinear optimisation problem with up to the time t = ts . At time t = ts , S + R units of item

two decision variables to and ts . are replenished. Then after fulfilling partially backlogged

quantities, the on-hand inventory level is S units. Out of S

units, W units are kept in OW and remaining S − W units

4.1. Boundary cost for single-warehouse system are stored in RW. At time tr , the inventory level in RW

For finding the boundary cost for a single-warehouse sys- reaches to zero due to the combined effect of demand and

tem, the initial stock level will be the capacity of OW, i.e. deterioration and also the inventory level W in OW reduces

W. In this case, the inventory level Io (t) at OW during the due to the effect of deterioration. During the period tr ≤

time interval 0 ≤ t ≤ ts satisfies the differential equations t ≤ to , the inventory level in OW decreases due to demand

as follows: and deterioration simultaneously, and at time t = to ( = T ),

the level reaches to zero. The pictorial representation of this

Io (t) + αIo (t) = −f (t), 0 ≤ t ≤ to , (26) policy is shown in Figure 2.

1042 A.K. Bhunia et al.

Io (t) = 0 at t = 0, (41)

Io (t) = S at t = ts (42)

and

Io (t) = 0 at t = to (= T ). (43)

Again,

equations (38)–(40) are given by

Figure 2. Graphical representation of two-warehouse inventory t

system with SFI policy. Io (t) = γ (ts − t) f (t) dt, 0 ≤ t < ts , (45)

0

The stock depletion at RW during the time interval = W exp α(ts − t), t s ≤ t ≤ tr , (46)

ts ≤ t ≤ tr is mainly for meeting up the demand by the cus- to

tomers and partly due to deterioration effect of the items = exp (−αt) exp (αt) f (t) dt, tr < t ≤ to .

which are disposed continuously as they approach the sell- t

ing point. Hence, the inventory level Ir (t) at RW satisfies (47)

the differential equation

Now using the continuity of Io (t) at time t = tr , we

Ir (t) + βIr (t) = −f (t) , t s ≤ t ≤ tr , (33) have

to

with the condition W exp{α(ts − tr )} = exp(−αtr ) exp(αt)f (t) dt.

tr

(48)

Ir (t) = 0 at t = tr . (34) As the highest shortage level is R which occurs at t =

Again, ts− , the value of R is given by

ts

Ir (t) = S − W at t = ts . (35) R=− γ (ts − t) f (t) dt. (49)

0

Using (34), the solution of (33) is given by Now the cumulative inventories in RW during ts ≤ t ≤

tr

tr and OW during ts ≤ t ≤ to are

tr to

Ir (t) = exp (−βt) exp (βt) f (t) dt, t s ≤ t ≤ tr .

t Ir (t) dt and Io (t)dt,

(36) ts ts

Again from (35) and (36), we have respectively.

tr

The present values of the inventory holding cost in RW

S=W+ exp {β(t − ts )} f (t) dt. (37) and OW are

ts tr to

Chr e−rt Ir (t) dt and Cho e−rt Io (t) dt,

Again the inventory level Io (t) at OW during the time ts ts

interval 0 ≤ t ≤ to satisfies the differential equations as fol- respectively.

lows: On the other hand, the present values of the backlogging

cost and the opportunity cost due to lost sale are

Io (t) = −γ (ts − t) f (t) , 0 ≤ t < ts , (38)

ts t

−rt

Io (t) + αIo (t) = 0, ts ≤ t ≤ tr , (39) Cb e γ (ts − u) f (u) du dt and

0 0

ts

Io (t) + αIo (t) = −f (t) , tr < t ≤ to (= T ), (40) Cls e−rts [1 − γ (ts − t)] f (t) dt,

0

International Journal of Systems Science 1043

OW are

tr to Io (t) = 0 at t = to (= T ). (56)

β Ir (t) dt and α Io (t) dt,

ts ts In this case, the present value of the total relevant cost

per unit time can be obtained as follows:

respectively.

Again the present value of the cost for deteriorated units to

is TC1(ts , to ) = Co + Cho e−rt Io (t) dt

ts

tr to

−rt −rt ts t

Cp β e Ir (t) dt + α e Io (t) dt . + Cb e−rt

γ (ts − u) f (u) du dt

ts ts

0 0

to

Hence, the present value of the total relevant cost per + Cls e−rts {1 − γ (ts − t)} f (t) dt

ts

unit time during the cycle 0 ≤ t ≤ to is given by to

+ Cp α e−rt Io (t) dt T. (57)

ts

tr

T C2(ts , to ) = Co + Chr e−rt Ir (t) dt

ts In this case, the corresponding optimisation problem is

to given by

+ Cho e−rt Io (t) dt

ts

ts t Minimise TC1(ts , to )

(58)

+ Cb e−rt γ (ts − u) f (u) du dt subject to to > ts and ts > 0.

0 0

to

−rts

+ Cls e {1 − γ (ts − t)} f (t) dt 6.1. Boundary cost for single-warehouse system

ts

tr to with SFI policy

+ Cp β e−rt Ir (t) dt + α e−rt Io (t) dt T. This cost can be obtained in a similar way of boundary cost

ts ts for single-warehouse system with IFS policy.

(50) In this case, the corresponding optimisation problem is

given by

Hence, our problem is to determine the optimal values Minimise TCW(to )

of ts and to by solving the following nonlinear optimisation (59)

subject to to > ts and ts > 0,

problem:

where

Minimise TC2(ts , to )

(51) to

subject to to > ts and ts > 0.

TCW(to ) = Co + Cho e−rt Io (t) dt

ts

ts t

6. Single-warehouse model with SFI policy + Cb e−rt γ (ts − u) f (u) du dt

0 0

In this case, Io (t) at OW during the time interval 0 ≤ t ≤ to to

satisfies the differential equations as follows: + Cls e−rts {1 − γ (ts − t)} f (t) dt

ts

Io (t) = −γ (ts − t)f (t), 0 ≤ t < ts , (52) to

+ Cp α e−rt Io (t) dt T. (60)

ts

Io (t) + αIo (t) = −f (t), ts ≤ t ≤ to (= T ), (53)

Now, let us discuss the solution procedure of the optimi-

Io (t) = 0 at t = 0, (54) sation problems of both the inventory models with IFS

and SFI policies. Depending on the average costs com-

Io (t) = S at t = ts (55) puted from single- and two-warehouse systems, the crucial

decision regarding whether hiring a rented warehouse is

1044 A.K. Bhunia et al.

beneficial or not is made. In order to determine the cycle gorithm is inspired by the social behaviour of bird flocking

length and the highest inventory level along with the best or fish schooling. In PSO, the potential solutions, called

found average cost of the system with IFS and SFI policies particles, fly through the search space of the problem by

(basically it is the optimal cost but optimality cannot be following the current optimum particles. PSO is initialised

proved analytically), we propose the following algorithm. with a population of random particle positions (solutions)

and then searches for optimum in generation to generation.

Step 1: Read different input parameters of the inventory In every iteration, each particle is updated with two best

system. positions (solutions). The first one is the best position (so-

Step 2: Compute the boundary cost TCW by solving lution) so far reached by the particle and this best position is

(k)

the optimisation problem for single-warehouse in- said to be personal best position and called pi . The other

ventory system for S = W. one is the current best position (solution), obtained so far

Step 3: Compute S ∗ (the best found value of S) for by any particle in the population. This best value is a global

two-warehouse inventory system with average cost (k)

best value and called pg .

TC2. If S ∗ > W , go to Step 5, otherwise go to In each generation, the velocity and position of ith

Step 4. (i = 1, 2, . . . , p size) particle are updated by the following

Step 4: Compute S ∗ for single-warehouse system with rules:

average cost TC1. If S ∗ < W , go to Step 6, other-

wise the solution is not admissible (feasible) for the (k+1)

vi

(k) (k) (k)

= wv i + c1 r1 pi − xi + c2 r2 pg(k) − xi

(k)

given input parameters. Go to Step 7.

(61)

Step 5: If TC2 < TCW, S = S ∗ is the best found solu-

and

tion for a two-warehouse inventory system, other-

wise S = W is the best found solution. In the latter (k+1) (k) (k+1)

xi = xi + vi , (62)

case, we have the inventory situation with only one

warehouse, i.e. only OW which is filled to its maxi-

mum capacity. Go to Step 7. where w is the inertia weight and k (= 1, 2, . . . , m- gen)

Step 6: If TC1 < TCW, S = S ∗ , otherwise S = W is the indicates the iterations (generations). The constants

best found solution for a single-warehouse system. c1 (> 0) and c2 (> 0) are the cognitive and social learn-

Go to Step 7. ing rates, respectively, which are the acceleration constants

(k)

Step 7: Stop. responsible for varying the particle velocity towards pi

(k)

and pg , respectively.

In Steps 2–4 of the proposed algorithm, the optimi- From (61), it is clear that the updated velocity of ith

sation problems of single- and two-warehouse inventory particle is calculated by considering three components:

systems are to be solved. Now there is an important ques- (i) previous velocity of the particle, (ii) the distance be-

tion: by which method can these problems be solved? As tween the particle’s best previous and current positions and

the optimisation problems in (18), (25), (32), (51), (58) and (iii) the distance between swarm’s best experience (the po-

(59) in both IFS and SFI policies are highly nonlinear in sition of the best particle in the swarm) and the current

nature, so to find the analytical solutions (if any) of these position of the particle. The velocity in (61) is also limited

problems is a difficult task. Furthermore, if we apply ei- by the range [−vmax , vmax ] , where vmax is called the maxi-

ther direct or gradient-based iterative method, in most of mum velocity of the particle. The choice of a too small value

the cases, it gives local optimum value. Hence, we need to for vmax can cause very small updating of velocities and po-

employ a meta-heuristic search algorithm for solving these sitions of particles at each iteration. Hence, the algorithm

problems. may take a long time to converge and faces the problem of

A number of researchers have successfully used meta- getting stuck to local minima. To overcome these situations,

heuristic methods to solve complicated optimisation prob- Clerc (1999) and Clerc and Kennedy (2002) proposed an

lems in different fields of scientific and engineering disci- improved velocity update rules employing a constriction

plines. Some of these algorithms are simulated annealing, factor χ . According to them, the updated velocity is given

tabu search, genetic algorithm, PSO, ant colony optimisa- by

tion, etc. Among these algorithms, the widely used efficient

algorithm PSO has been employed for solving the optimi- (k+1) (k) (k) (k) (k)

vi =χ vi + c1 r1 pi − xi + c2 r2 pg(k) − xi .

sation problems mentioned earlier. (63)

PSO is a population-based heuristic global search algo- Here, the constriction factor χ is expressed as

rithm based on the social interaction and individual expe-

rience. It was proposed by Eberhart and Kennedy (1995) 2

and Kennedy and Eberhart (1995). It has widely been used χ= , (64)

in finding the solutions of optimisation problems. This al- 2 − φ − φ 2 − 4φ

International Journal of Systems Science 1045

where φ = c1 + c2 , φ > 4 and χ is a function of c1 and c2 . policy. Therefore, the management of any organisation may

Typically, c1 and c2 are both set to be 2.05. Thus, φ is set select the inventory system with SFI policy.

to 4.1 and the constriction coefficient χ is 0.729. This PSO For the entire computation, the values of PSO parame-

is known as PSO-CO, i.e. constriction coefficient-based ters are considered as follows:

PSO.

The search procedure of the PSO can be summarised as p_size = 100, m_gen = 100, C1 = 2.05 and C2 = 2.05.

follows.

The initial velocity has been assigned randomly be-

Step 1: Initialise the PSO parameters and bounds of the tween −Vmax and Vmax , where Vmax is set to be equal to

decision variables of the optimisation problem. 20% of the range of each variable in the search domain.

Step 2: Initialise a population of particles with random From the statistical analysis of the result obtained for dif-

positions and velocities. ferent cases (cf. Table 4 and 5), it is clear that the proposed

Step 3: Evaluate the fitness of all particles. soft computing method PSO-CO is stable.

Step 4: Keep track of the locations where each individ-

ual has its highest fitness so far. 9. Sensitivity analysis

Step 5: Keep track of the position with the global best

fitness. For the given numerical example mentioned above, sensi-

Step 6: Update the velocity of each particle. tivity analyses have been performed to study the effect of

Step 7: Update the position of each particle. underestimation or overestimation of system parameters on

Step 8: If the stopping criterion is satisfied, go to the best found values of the initial stock level, maximum

Step 9, otherwise go to Step 3. shortage level and cycle length with the minimum average

Step 9: Print the position and fitness of global best cost of the system. The percentage changes corresponding

particle. to the above-mentioned best found values of the average

Step 10: End. cost of the system are taken as measures of sensitivity. These

analyses have been carried out for the inventory model with

Moreover, the flowchart of the PSO algorithm is shown SFI policy, f (t) = a + bt and γ (ts − t) = 1+δ(t1s −t) , as it is

in Figure 3. less expensive than other models. These have been per-

Using this technique, Taleizadeh et al. (2010) and formed by changing (increasing and decreasing) the pa-

Taleizadeh, Pentico, Aryanezhad, and Ghoreyshi (2012) rameters by −20% to + 20%. The results are obtained by

solved supply chain inventory problems considering some changing one parameter at a time and keeping the others at

realistic situations. their original values. The results of these analyses are given

in Table 6.

Based on the computational results as shown in

8. Numerical examples Table 6, the following observations can be made.

To illustrate the developed inventory model, the following

numerical example has been solved with different inventory (1) Average cost of the system is more sensitive with

policies and backlogging rates. Here, W = 100, a = 400, b respect to parameters a (location parameter of de-

= 15, δ = 0.6, Co = $100, Cho = $0.2, Chr = $0.6, Cb = mand), C0 (ordering cost), Chr (holding cost in RW)

$3.0, C1 = $15.0, Cp = $10.0, α = 0.05, β = 0.03 and r and α and β (deterioration rates). It is also moder-

= 0.06. The values of the model parameters considered in ately sensitive with respect to Cho (holding cost

this numerical example are not collected from any real life in OW) and Cp (purchase cost), whereas it is in-

case study, but are realistic. In finding the solution, the soft sensitive with the changes of the shape parameter

computing method PSO-CO has been used. This PSO-CO b of demand, backlogging parameter δ, backlog-

has been coded in C programming language. The compu- ging cost Cb , opportunity cost Cls and the inflation

tational work has been done on a PC with Intel Core-2-duo rate r.

2.5 GHz Processor in LINUX environment. For each case, (2) Table 6 reveals that the optimum cycle length T ∗ is

20 independent runs have been performed by the proposed highly sensitive with respect to parameters a (loca-

PSO of which the best value of the cost function has been tion parameter of demand), C0 (ordering cost), Chr

taken. (holding cost in RW) and β (deterioration rate in

Also, to test the performance of our developed PSO-CO RW). T ∗ is also moderately sensitive with respect

for solving the problems for each example, mean, coeffi- to Cp (purchase cost) and α (deterioration rate in

cient of variation of the value of the cost function and the OW). It is insensitive with respect to δ, Cho , Cb ,

average time of 20 runs have been calculated. Cls and r.

From Table 2 and 3, it is observed that the average cost (3) The optimum highest stock level S ∗ is highly sen-

of the system with SFI policy is lower than that with IFS sitive with respect to parameters a, C0 , Chr , α and

1046 A.K. Bhunia et al.

International Journal of Systems Science 1047

Best found

Case f (t) γ (ts − t) tr to ts (= T ) S∗ R∗ minimum cost Action

1

1 a + bt 0.5089 0.7503 0.7632 305.39 5.12 250.89 L2 -system

1 + δ(ts − t)

1

2 a 0.5033 0.7455 0.7720 302.84 10.37 247.31 L2 -system

1 + δ(ts − t)

3 a + bt e−δ(ts −t) 0.4761 0.7135 0.7331 293.53 7.93 250.06 L2 -system

4 a e−δ(ts −t) 0.4793 0.7218 0.7491 293.08 10.71 247.50 L2 -system

Best found

Case f (t) γ (ts − t) ts tr t0 (= T ) S∗ R∗ minimum cost Action

1

1 a + bt 0.0258 0.5369 0.7848 306.30 10.13 246.15 L2 -system

1 + δ(ts − t)

1

2 a 0.0261 0.5397 0.7892 307.05 10.23 245.66 L2 -system

1 + δ(ts − t)

3 a + bt e−δ(ts −t) 0.0316 0.5245 0.7631 300.73 12.34 248.09 L2 -system

4 a e−δ(ts −t) 0.0343 0.5421 0.7918 304.69 13.37 244.43 L2 -system

Table 4. Statistical analysis of the results for different demand and backlogging rates in IFS policy.

Case 1 2 3 4

SD of objective value∗ 0.039687633 0.048007936 0.034717296 0.050832542

COV of Object-value∗ 0.000158 0.000194 0.000143 0.000175

∗ SD: standard deviation; COV: coefficient of variation.

Table 5. Statistical analysis of the results for different demand and backlogging rates in SFI policy.

Case 1 2 3 4

SD of objective value∗ 0.030166206 0.012780193 0.009952267 0.231468993

COV of Object-value∗ 0.000123 5.2 × 10−05 4.13 × 10−05 0.000875

∗ SD: standard deviation; COV: coefficient of variation.

β. It is moderately sensitive with respect to Cho (social learning rate). In each case, 20 independent runs

and Cp ; however, it is insensitive with respect to have been performed by PSO, of which the best value of

b, δ, Cb , Cls and r. the cost function has been considered. The results have been

(4) The optimum highest shortage level R ∗ is shown in Table 7. From Table 7, it is evident that the values

strongly sensitive with respect to parameters a, of S, R and the minimum cost are the same for different

δ, C0 , Cho , Cls , α and β. It is moderately sen- values of c1 and c2 .

sitive with respect to Chr , Cb and Cp . However, it

is insensitive with respect to b and r.

10. Conclusion

Also to study the performance of PSO-CO, sensitivity In inventory management, there arise some important

analyses (for f (t) = a + bt and γ (ts − t) = 1+δ(t1s −t) ) have questions.

been carried out numerically on the highest inventory level How, when and where to stock the goods? Sometimes

(S), highest shortage level (R) and cost of the system with the management authorities are bound to replenish more

respect to parameters c1 (cognitive learning rate) and c2 goods (larger than the capacity of OW) to reduce the average

1048 A.K. Bhunia et al.

Table 6. Sensitivity analysis with respect to different parame- Table 7. Sensitivity analysis with respect to PSO parameters c1

ters of the inventory system with SFI policy, f (t) = a + bt and and c2 with SFI policy, f (t) = a + bt and γ (ts − t) = 1+δ(t1s −t) .

γ (ts − t) = 1+δ(t1s −t) .

Best found

% change in c1 c2 S R minimum cost

% changes of average

1.90 2.20 306.30 10.13 246.15

Parameter parameters cost T∗ S∗ R∗

1.95 2.15 306.30 10.13 246.15

a −20 −10.84 6.11 −15.05 −9.21 2.00 2.10 306.30 10.13 246.15

−10 −5.35 5.95 −4.61 −2.22 2.05 2.05 306.30 10.13 246.15

10 5.11 −3.82 5.75 3.43 2.10 2.00 306.30 10.13 246.15

20 9.99 −9.09 8.85 9.45 2.15 1.95 306.30 10.13 246.15

b −20 −0.04 0.52 0.48 0.21 2.20 1.90 306.30 10.13 246.15

−10 −0.02 0.14 0.11 0.08 2.05 2.10 306.30 10.13 246.15

10 0.02 −0.03 0.08 −2.36 2.10 2.10 306.30 10.13 246.15

20 0.04 0.69 0.70 2.01 2.15 2.10 306.30 10.13 246.15

δ −20 0.91 −1.88 −0.68 16.89 2.10 2.15 306.30 10.13 246.15

−10 1.11 −2.05 −0.55 7.88 2.20 2.15 306.30 10.13 246.15

10 1.41 −3.03 −0.98 −10.23 2.20 2.20 306.30 10.13 246.15

20 1.53 −2.67 −0.51 −12.75

Co −20 −10.94 −10.38 −10.27 −12.85

−10 −5.32 −4.92 −4.86 −6.54

10 5.05 5.15 5.18 3.88 In inventory control theory, this type of problem is known

20 9.96 5.97 5.82 9.43 as a two-warehouse inventory problem.

Cho −20 −7.02 2.15 2.45 −6.60

−10 −3.66 0.93 1.19 −6.13 In this paper, for the first time, an attempt has been

10 3.98 −0.50 −0.73 5.87 made to develop two-warehouse inventory models with IFS

20 8.26 −1.18 −1.52 8.70 and SFI policies incorporating the different preservation

Chr −20 21.79 5.49 5.83 −4.74 facilities in OW and RW for deteriorating items. It is also

−10 −3.34 5.54 5.83 −3.19 assumed that the preservation facility in RW is better than

10 3.10 −5.19 −5.53 4.52

20 5.99 −9.39 −9.92 6.20 that in OW. As the rate of demand is assumed to be time

Cb −20 −0.04 −0.18 −0.27 2.46 dependent, so the entire cycle over the first period cannot

−10 −0.02 0.17 0.14 0.64 be repeated after the cycle length T. It can subsequently

10 0.02 0.59 0.59 0.37 be repeated with the changed value of the constant ‘a’

20 0.04 0.64 0.72 −1.49 computed from ‘a + bT’ (where T is the associated value

Cls −20 −0.37 0.64 −0.07 20.07

−10 −0.17 0.60 0.32 8.15 of the previous period).

10 0.14 −0.13 0.17 −8.29 In IFS policy, shortages are considered to be at the end

20 0.26 0.54 1.02 −13.06 of the cycle, whereas in the case of SFI policy these are

Cp −20 −4.87 4.41 4.67 −3.30 considered to be at the beginning of the cycle. Now there

−10 −2.42 1.94 2.13 −3.47 is a question: which policy is less expensive? Its answer

10 2.38 −1.78 −1.88 0.93

20 4.72 −2.34 −2.59 4.68 cannot be given analytically due to highly nonlinear nature

α −20 −18.92 4.81 −16.15 −19.34 of the corresponding optimisation problem. From the nu-

−10 −8.30 2.37 −5.84 −6.76 merical example, it is observed that Model 2 (model with

10 6.70 −0.52 5.02 8.23 SFI policy) is less expensive than Model 1 (i.e. model with

20 12.25 −0.75 8.89 11.56 IFS policy). Hence from the economical point of view, it

β −20 −12.56 5.21 −26.00 −13.11

−10 −6.60 5.40 −10.66 −7.32 can be concluded that one can choose Model 2 (i.e. Model

10 6.06 −10.58 2.61 2.51 with SFI policy).

20 11.43 −18.08 4.96 13.74 For further study, one can extend the proposed model

r −20 0.15 0.33 0.40 −1.74 by incorporating some more realistic features, such as

−10 0.08 0.54 0.54 0.27 inventory-level-dependent demand, price-dependent de-

10 −0.07 0.72 0.66 2.37

20 −0.15 0.95 1.03 −1.60 mand, quantity discount and interval-valued inventory

costs. Also, the model can be extended to multi-period

finite-horizon model.

discount for bulk purchase, reduce the costs of re-ordering, Acknowledgements

meet the higher demand, availability of seasonal products The authors are grateful for valuable comments and suggestions

with lower cost, etc. In this situation, an additional storage from the respected reviewers. Their valuable comments and sug-

space (termed as RW) is required to store the excess goods. gestions have enhanced the strength and significance of our paper.

International Journal of Systems Science 1049

Notes on contributors Das, B., Maity, K., and Maiti, M. (2007), ‘A Two Warehouse

A.K. Bhunia is an associate professor in the Department of Math- Supply Chain Model Under Possibility/Necessity/Credibility

ematics, The University of Burdwan, India. Several students ob- Measures’, Mathematical and Computer Modeling, 46, 398–

tained their PhD degree under his supervision. His research inter- 409.

ests include computational optimisation, soft computing, interval Datta, T,K., and Pal, A.K. (1988), ‘Order Level Inventory System

mathematics, interval ranking, etc. He has published several re- With Power Demand Pattern for Items With Variable Rate of

search papers in various international SCI journals. He has also Deterioration’, Indian Journal of Pure and Applied Mathe-

written two research monographs and a book. He is also an asso- matics, 19, 1043–1053.

ciate editor of the Springer journal ‘OPSEARCH’. Datta, T.K., and Pal, A.K. (1991), ‘Effects of Inflation and Time

Value of Money on an Inventory Model With Linearly Time-

Ali Akbar Shaikh is a faculty member of Krishnagar Government Dependent Demand Rate and Shortages’, European Journal

College, India. He has published three research papers in referred of Operational Research, 52, 326–333.

journals. His research interests include inventory control theory, Dey, J.K., Mondal, S.K., and Maiti, M. (2008), ‘Two Storage In-

interval optimisation and PSO. ventory Problem With Dynamic Demand and Interval Valued

Lead-Time Over Finite Time Horizon Under Inflation and

R.K. Gupta is an assistant professor in the Department of Time-Value of Money’, European Journal of Operational Re-

Commerce & Management in West Bengal State University, India. search, 185, 170–194.

He has published eight research papers in referred journals. His Eberhart, R.C., and Kennedy, J.F. (1995), ‘A New Optimizer Using

research interest includes optimisation in reliability management, Particle Swarm Theory’, in Proceeding of the Sixth Interna-

inventory control, transportation management and applications of tional Symposium on Micro Machine and Human Science,

genetic algorithm in managerial decision-making. He has authored Nagoya, Japan, pp. 39–43.

a research monograph. Presently, he is working as an associate Ghare, P.M., and Schrader, G.F. (1963), ‘A Model for Exponen-

editor of ‘International Journal of Productivity Management and tially Decaying Inventories’, Journal of Industrial Engineer-

Assessment Technologies’. ing, 14, 238–243.

Goswami, A., and Chaudhuri, K.S. (1992), ‘An Economic Order

Quantity Model for Items With Two Levels of Storage for a

Linear Trend in Demand’, Journal of Operational Research

Society, 43, 157–167.

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