Two Storage Production Model with Imperfect Quality for Decaying Items Under Preservation

In this paper, an imperfect inventory model with two separate warehouses called owned warehouse/show-room (OW) and rented warehouse (RW) is developed. The proposed model of this paper also considers a realistic assumption regarding the storage capacity of the rented warehouse. Production of defective units is a natural phenomenon in a production process. Defective items should be treated as a result of imperfect quality production. Inflation is also considered in this model. A solution procedure is presented to determine an optimal replenishment cycle, production cost, inspection cost, damaged item cost and preservation technology cost such that the total cost per unit time is minimized. A numerical example and sensitivity analysis are presented to illustrate the model.