In this paper we investigate an inventory system with two products which are substitutable. When there is a stock-out of first product, a fraction of demand of this product is met from the inventory of second product and remaining part of the demand which is not met is assumed to be lost and vice-versa. Shortages are allowed. The demand rate for the both the product is assumed to be deterministic and quadratic. Both product one and two are ordered jointly in every ordering cycle. The problem is formulated to find the optimal order quantities by minimizing the total inventory cost. Sensitivity analysis is dispensed to illustrate the parameters of the model. The result indicates that there is considerable improvement in the total cost of the inventory system with substitution over the case while not substitution.
Volume 11 | 07-Special Issue
Pages: 1553-1560