OPTIMIZING TWO-WAREHOUSE RED WINE INVENTORY MANAGEMENT WITH DETERIORATION: A LIFO DISPATCH STRATEGY

Abstract

In this study, a two-warehouse inventory model for the red wine industry is presented, focusing on items that deteriorate. The model takes into account the effects of inflation and operates on the LIFO (Last In, First Out) distribution policy. The goal is to minimize the total inventory cost, including the cost of maintaining inventory and the cost of purchasing new inventory. The model assumes a constant and known demand for red wine over time, with no permitted shortages. The stock system consists of warehouse A and warehouse B, with starting stocks fixed in each case. Inventory balance equations track inventory levels at each warehouse, taking into account transfers between warehouses and customer demand. The LIFO shipping policy is implemented to determine the quantities transferred between warehouses. Inflation is factored into the model by adjusting the cost of buying new inventory. This adjustment may be based on historical inflation rates or other relevant factors. The objective function is to minimize the total inventory cost, taking into account inventory costs and inflation-adjusted purchasing costs. The model provides a framework for making decisions about stock levels and transfer rates between warehouses. By optimizing these decisions, the model aims to achieve cost savings while ensuring that demand is met without bottlenecks. The model results can serve as a guide for inventory management strategies in the red wine industry, taking into account the specific challenges presented by the spoiled nature of the product and the impact of inflation.

Keywords:- Inventory, owned warehouse, rented warehouse, ramp type demand, deteriorating items, inflation, without Shortages and LIFO dispatching policy.