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A Model of a Multi-Product Two-Stage Inventory System with Limited Intermediate Bulk Storage Capacity

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  • Hans G. Daellenbach

    (University of Canterbury, New Zealand)

Abstract

A firm has a limited number of bulk storage tanks available for intermediate storage. A joint decision as to the assignment of products to tanks and the inventory stocking and replenishing policy for each product has to be made. It is shown that for a given inventory policy the minimization of the total cost expression can be transformed into a nested optimization problem involving three phases. These can be optimized sequentially starting with the innermost phase. The last phase turns out to be a transportation problem. The solution for an example involving 18 products and 10 tanks is presented and discussed.

Suggested Citation

  • Hans G. Daellenbach, 1977. "A Model of a Multi-Product Two-Stage Inventory System with Limited Intermediate Bulk Storage Capacity," Management Science, INFORMS, vol. 23(12), pages 1314-1320, August.
    • Handle: RePEc:inm:ormnsc:v:23:y:1977:i:12:p:1314-1320
    DOI: 10.1287/mnsc.23.12.1314
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