A Three-Warehouse Inventory Model for Deteriorating Items to Study the Effective Preservation Cost and Green Investment Under Partial Substitution

In this paper, an inventory model is developed for a set of two substitutable deteriorating items. Stock-out based partial substitution is considered. Due to limited capacity of own warehouse, two rented warehouses are hired for each item. The demand of the items are met from own warehouse. To reduce the deterioration rate, preservation investment is made in the rented warehouses, and also to reduce the carbon emission due to storing, investment on green policy is made for rented warehouses. The rate of substitution during the stock-out period of an item is assumed to be stochastic in nature. The present inventory model is formulated to study the effective preservation cost and green investment under partial substitution policy with a view to minimize present worth of the total average cost under three-warehouse setup (one own warehouse and two rented warehouses). The model is illustrated through numerical examples along with the sensitivity analysis of parameters.