Two-warehouse inventory model for deteriorating items with demand influenced by innovation criterion in growing technology market

Abstract

One of the major concerns for the technology market is the demand volatility and its impact on inventory policies. Demand volatility in the technology sector may arise due to many factors namely customer choices, competition, growing market size, and so on. Often companies use rented warehouses to absorb any fluctuations in demand. Unfortunately, warehouse and inventory researches ignore the phenomenon of growing market size to formulate policy decisions. In this paper, we proposed a two-warehouse inventory model with deterioration for technology products with linearly increasing market size where demand follows innovation diffusion criterion. The model is based on the assumption that the holding costs in the rented warehouse are more than the own warehouse. A simple solution procedure also discussed to solve nonlinear cost function. Numerical example and sensitivity analysis are also used to describe the utility of the model.

Keywords:

• two-warehouse inventory
• technology products
• deterioration
• innovation diffusion
• growing market size