Applied Mathematical Modelling 34 (2010) 35713585

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Applied Mathematical Modelling

journal homepage: www.elsevier.com/locate/apm

Two warehouse inventory models for single vendor multiple retailers

with price and stock dependent demand
Debdulal Panda a, Manas Kumar Maiti b,*, Manoranjan Maiti c
a

Department of Engineering Science, Haldia Institute of Technology, Haldia, Purba-Medinipur, WB 721657, India
Department of Mathematics, Mahishadal Raj College, Mahishadal, Purba-Medinipur, WB 721628, India
c
Department of Computer Application and Mathematics, Gurunanak Institute of Technology, Kolkata 700114, WB, India
b

a r t i c l e

i n f o

Article history:
Received 23 August 2008
Received in revised form 10 March 2010
Accepted 15 March 2010

Keywords:
Basic period policy
Possibility/necessity
Fuzzy simulation
Genetic algorithm

a b s t r a c t
Here a single vendor multiple retailer inventory model of an item is developed where
demand of the item at every retailer is linearly dependent on stock and inversely on some
powers of selling price. Item is produced by the vendor and is distributed to the retailers
following basic period policy. According to this policy item is replenished to the retailers
at a regular time interval (T1) called basic period (BP) and replenishment quantity is sufcient to last for the period T1. Due to the scarcity of storage space at market places, every
retailer uses a showroom at the market place and a warehouse to store the item, little away
from the market place. Item is sold from the showroom and is lled up from the warehouse
in a bulk release pattern. Some of the inventory parameters are considered as fuzzy in nature and model is formulated to maximize the average prot from the whole system. Imprecise objective is transformed to equivalent deterministic ones using possibility/necessity
measure of fuzzy events with some degree of optimism/pessimism. A genetic algorithm
(GA) is developed with roulette wheel selection, arithmetic crossover and random mutation and is used to solve the model. In some complex cases, with the help of above GA,
fuzzy simulation process is used to derive the optimal decision. The model is illustrated
through numerical examples and some sensitivity analyses are presented.
2010 Published by Elsevier Inc.

1. Introduction
It has been realized by the companies that efcient management of inventories across the different facilities in a supply
chain is critical to increase the prots [1,2]. The efcient management can be achieved through better coordination and more
cooperation among the different facilities. If no such coordination exists, then each facility will act independently to make
decision to maximize their prots. Certainly, this may not be optimal if the supply chain is considered as a whole. This is one
of the reasons because integrated inventory models are receiving much interest in recent years. In particular, authors have
focused their attention on integrated inventory models for the single vendor single retailer system [3,4,2,5]. In single vendor
single retailer system item is produced at a production house (called vendor) and sold through a retailer. But, in reality, item
is produced at a production house and sold through different retailers. Recently Riekstsa and Venturab [6] developed an
inventory model with one warehouse multiple retailer system under a bi-modal transportation facilities where transportation options include truck-loads and a less than truck-load carrier. Kang and Kim [7] developed another one warehouse multiple retailer system to determines a replenishment plan for each retailer by using the information on demands of nal
customers and inventory levels of the retailers.
* Corresponding author.
E-mail addresses: debdulalpanda@yahoo.co.in (D. Panda), manasmaiti@yahoo.co.in (M.K. Maiti), mmaiti2005@yahoo.co.in (M. Maiti).
0307-904X/$ - see front matter 2010 Published by Elsevier Inc.
doi:10.1016/j.apm.2010.03.007

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

Another shortcoming in the existing single vendor single retailer systems is that demand of the item in most of the models is assumed as constant. But in reality inuence of product availability and selling price on demand is well established [8
11]. Though a considerable number of research papers have been produced for production inventory models, none has considered single vendor multiple retailer inventory model specially when demand of the item is stock and price dependent and
inventory costs are imprecise in nature.
Again in vendor-retailer models it is assumed that the retailer has only one outlet. Item is stored as well as sold to the
customers from that outlet. But, now-a-days in the important market places like super markets, municipality markets,
etc., it is almost impossible to have a big showroom/shop due to the scarcity of space and very high rent. Normally, retailers
operate through two rented houses- one, smaller in size (Si), located in the heart of the market place and other (Wi) with
large capacity situated little away from the market place. Items are sold from Si and are replenished from Wi in a bulk release
pattern. Bhunia and Maiti [12] developed a two warehouse inventory model with linearly stock dependent demand. Maiti
and Maiti [11] developed an inventory model with two warehouse facilities under fuzzy space and investment constraints.
Maiti and Maiti [13] developed another inventory model with two warehouse facilities where replacement lead-time is fuzzy in nature. Recently a two warehouse inventory model with joint replenishment and simultaneous transfer of items from
one warehouse to another is proposed using basic period (BP) policy by Maiti [14]. Though two-storage inventory models are
extensively studied none has assumed two-storage facilities for the retailer in vendor-retailer models.
Overriding the above shortcomings, here, an integrated inventory model of an item is developed where item is produced
at a production house (Ph) and is distributed to different retailers following BP policy. According to this policy, item is distributed to the retailers at a regular time interval (T1) called BP and replenished quantity is sufcient to meet demand of the
item for the period T1. Item is produced at the vendor (Ph) during a period which is a multiple (K1) of T1 and item remains in
hand after production are distributed during another period which is a multiple (K2) of T1. Amount of the item remained in
hand at the end of this period is sold in a lot at a reduced price by the vendor at the production house. Demand of the item at
different retailers is assumed to be linearly dependent on stock at showroom. Stocks at the showroom inuence the customers to buy more and hence the demand is stock dependent. But this psychological inuence must have an lower limit, i.e.,
below some level, demand will remain unchanged. Demand of the item depends inversely on some powers of selling price
also. Let every retailer Ri has a showroom Si having a limited capacity Qi at the market place and a warehouse Wi having sufcient capacity little away from the market place. Due to high rent at market place holding cost at Si is assumed to be higher
than that at Wi and Ph. Item is sold from Si and is lled up from Wi in a bulk release pattern. Transportation cost for transporting item from Wi to Si is also incorporated. Model is formulated to maximize the average prot from the whole system. A
genetic algorithm (GA) is developed with roulette-wheel selection, arithmetic crossover and random mutation and is used to
solve the model. When some inventory parameters are fuzzy in nature then the return function also becomes fuzzy. In this
case, since optimization of fuzzy objective is not well dened, imprecise objective is transformed to equivalent deterministic
ones using possibility/necessity measure of fuzzy events with some degree of optimism/pessimism. Finally optimal decision
is made using GA. When fuzzy parameters are Triangular Fuzzy Numbers (TFNs), the problem is transformed into a deterministic one using possibility/necessity measure on fuzzy event and solved using GA. When fuzzy parameters are not TFNs,
then it is very difcult to transform the imprecise objective into deterministic one. In that case following Liu and Iwamura
[15,16] fuzzy simulation process is proposed to solve the model. In this case with the help of simulation process, a GA is
developed to determine the optimal inventory decision. The models are illustrated numerically. The change in prot function
due to change in degree of optimistic/pessimistic level of objective function has been evaluated.
2. Mathematical preliminaries
~ be two fuzzy numbers with membership functions l x and
~ and b
Let a
~
a

lb~ x respectively. Then according to [17,9,18],

~ supfminl x; l~ y; x; y 2 R; x  yg;
~  b
posa
~
a
b

where the abbreviation pos represents possibility, and  is any one of the relations >, <, =, 6, P.

~ 1  posa
~
~  b
~  b;
nesa
where the abbreviation nes represents necessity.
~ # R and ~c f a
~ where f : R  R ! R is a binary operation then membership function
~; b
~; b
If a

for each z 2 R;

l~c z supfminla~ x; lb~ y; x; y 2 R and z f x; yg:

l~c of ~c is dened as
3

~ a1 ; a2 ; a3 (cf. Fig. 1) has three parameters a1, a2, a3 where a1 < a2 < a3 and is
Triangular Fuzzy Number(TFN): A TFN a
characterized by the membership function la~ , given by

la~ x

8 xa1
>
< a2 a1
a3 x1
> a3 a2

for a1 6 x 6 a2 ;
for a2 6 x 6 a3 ;

otherwise:

~ a1 ; a2 ; a3 (cf. Fig. 2) has three parameters a1, a2, a3 where a1 < a2 < a3 and is charParabolic fuzzy number(PFN): A PFN a
acterized by the membership function la~ given by

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

Fig. 1. Membership function of a triangular fuzzy number.

Fig. 2. Membership function of a parabolic fuzzy number.

8

2
>
a x
>
> 1  a22a1
>
<
la~ x 1   xa2 2
>
>
a3 a2
>
>
:
0

for a1 6 x 6 a2 ;
5

for a2 6 x 6 a3 ;
otherwise:

e having membership function l x is a subset of R, denoted by Aa and dened

a-cut set: a-cut set of a fuzzy number A
eA
e with membership value at least a.
as Aa fxjx 2 R and le x 6 ag, i.e., the set of all elements which belong to A
A

According to above denitions, following lemmas can easily be derived [11,12].

~ P b > a iff
~ a1 ; a2 ; a3 be TFN and b be a crisp number with 0 < a1 < a2 < a3, then posa
Lemma 1. If a

a3 b
a3 a2

~ P b 6 a iff
~ a1 ; a2 ; a3 be TFN and b be a crisp number with 0 < a1 < a2 < a3, then nesa
Lemma 2. If a

ba1
a2 a1

P a.
6 1  a.

2.1. Optimization using possibility/necessity

A general single-objective unconstrained mathematical programming is of the following form:

max

f x; n;

where x is a decision vector, n is a vector of crisp parameters, f(x, n) is the return function. In the above problem when n is a
fuzzy vector ~
n (i.e., a vector of fuzzy numbers), then return function f x; ~
n is imprecise in nature and can be represented by
fuzzy number whose membership functions involve the decision variable x as a parameter and can be obtained when membership functions of the fuzzy numbers in ~
n are known (since f is a function of decision vector x and the fuzzy numbers in ~
n).
In that case as the statement maximize f x; ~
n is not well dened, one can nd maximum value of z such that f x; ~
n P z. But
f x; ~
n P z is also not well dened and so one can measure its possibility/necesity in optimistic/pessimistic sense and if this
n P zg P a (which is also written as
possibility/necessity measure exceeds some predened level a, i.e., if pos=nesff x; ~
n with degree of optipos=nesf~
njf x; ~
n P zg P a) then z is taken as optimistic/pessimistic return of the fuzzy objective f x; ~
mism/pessimism a. Since our aim is to maximize the objective function it is worthwhile to maximize the optimistic/pessimistic return z and so one can nd x for which z is a maximum (cf. Liu and Iwamura [9,10]). When analytical form of
membership function of f x; ~
n is available one can transform pos=nesff x; ~
n P zg P a0 to an equivalent crisp constraint,

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

otherwise value of n are randomly generated from a cut set of fuzzy vector n and x is found from search space to maximize z
as described in the next section (see Algorithms 1 and 2 in Section 2.2). So when n is a fuzzy vector ~
n then following Liu and
Iwamura [9,10] one can convert the above problem (6) to the following chance constrained programming problems in optimistic and pessimistic sense respectively.

max z;
subject to posf~njf x; ~n P zg P a1

max

and

z;

subject to nesf~njf x; ~n P zg P a2 ;
where a1, a2 are predetermined condence levels for fuzzy objective, pos=nes {} denotes the possibility/necessity of the
event in {}. For each xed feasible solution x, the objective value z should be the maximum that the objective function
f x; ~
n achieves with at least possibility/necessity a.
2.2. Fuzzy simulation
The basic technique of chance constrained programming in a fuzzy environment is to convert the possibility/necessity
constraints to their respective deterministic equivalents according to predetermined condence level. However, the procedure is usually very hard and only successful for some special cases (cf. Lemmas 1 and 2). Following Liu and Iwamura [9] the
following two algorithms are developed to determine value of z for a feasible x for the problem (7) and (8).
Algorithm 1. Algorithm to determine z, for problem (7).
1.
2.
3.
4.
5.
6.

Set z = -1, a very large negative number.

n.
Generate n0 uniformly from the a1 cut set of fuzzy vector ~
If z < f(x, n0) then set z = f(x, n0).
Repeat steps 2 and 3, N times, where N is a sufciently large positive integer.
Return z.
End algorithm.

Algorithm 2. Algorithm to determine z, for problem (8).

njf x; ~
n < zg < 1  a2 . Now roughly nd a point n0 from fuzzy vector n,
We know that nesf~
njf x; ~
n 6 zg P a2 ) posf~
njf x; ~
n < zg < 1  a2
which approximately minimizes f. Let this value be z0 and e be a positive number. Set z = z0-e and if posf~
then increase z with e. Again check posf~
njf x; ~
n < zg < 1  a2 and it continues until posf~
njf x; ~
n < zg < 1  a2 . At this stage
decrease value of e and again try to improve z. When e becomes sufciently small then we stop and nal value of z is taken as
value of z. Using this criterion, required algorithm is developed as below:
1.
2.
3.
4.

Initialize z0, e.
Set z = z0-e, F = z0-e, F0 = z0-e.
Generate e0 uniformly from the 1-a2 cut set of fuzzy vector n.
If f x; ~
n0 < z.

5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

then go to step 11.

End If
Repeat step-3 to step-6 N times.
Set F = z.
Set z = z + e.
Go to step-3.
If(z = F0) // In this case optimum value of z < z0- e.
Set z = z-e, F = F-e, F0 = F0-e.
Go to step-3.
End If.
If (e < tol).
go to step-21.
End If.
e = e/N.
z = F + e.
Go to step-3.
Output F.

D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

3575

It is not possible to nd an optimum solution of problems (7) and (8) using any traditional gradient based optimization
problem until the possibilistic constraints are converted to equivalent crisp constraints. In all most all real life problems it is
not possible to convert the possibilistic constraints to their crisp equivalent. In that case with the help of above two algorithms any soft computing algorithm (Genetic Algorithm(GA), Simulated Annealing, Tabu Search etc.) can be used to solve
the above problems (7) and (8). In this paper GA is used for this purpose and since the above fuzzy simulation process is used
to check the constraints in these situations, the corresponding GA is called fuzzy simulation based GA. In the next section a
GA is discussed to solve (7) and (8) with the help of above two algorithms. This algorithm is named as FSGA.
2.3. Genetic Algorithm (GA)/ Fuzzy simulation based genetic algorithm (FSGA)
Genetic Algorithm is a class of heuristic search technique based on the principle of population genetics. In natural genesis
we know that chromosomes are the main carriers of the hereditary information from parents to offsprings and that genes,
which present hereditary factors, are lined up in chromosomes. At the time of reproduction, crossover and mutation take
place among the chromosomes of parents. In this way, hereditary factors of parents are mixed up and carried over to their
offsprings. Darwinian principle states that only the ttest animals can survive in nature. So a pair of ttest parents normally
reproduce better offspring.
The above mentioned phenomenon is followed to create a genetic algorithm for an optimization problem. Here potential
solution of the problem are analogous with the chromosomes and chromosome of better offspring with the better solution of
the problem. Crossover and mutation occur among a set of potential solutions and obtained a new set of solutions and it
continues until terminating conditions are encountered. Michalewicz [19] proposed a genetic algorithm named the Contractive Mapping Genetic Algorithm(CMGA) and proved the asymptotic convergence of the algorithm by the Banach xed-point
theorem. In CMGA, movement from an old population to a new population takes place only when the average tness of a
new population is better than the old one. This algorithm is modied with the help of a fuzzy simulation process to solve
the fuzzy stochastic models of this paper. The algorithm is named FSGA and this presented below. In the algorithm, pc, pm
are probabilities of the crossover and the probability of mutation, respectively, I is the iteration counter, and P(I) is the population of potential solutions for iteration I. The initialize(P(I)) function initializes the population P(I) at the time of initialization. The evaluate (P(I)) function evaluates the tness of each member of P(I) and at this stage an objective function value
due to each solution is evaluated via the fuzzy simulation process (using Algorithms 1 and 2). In case of crisp model objective
function is evaluated directly without using simulation algorithms. So in that case this GA is named ordinary GA. M is iteration counter in each generation to improve P(I) and M0 is upper limit of M.
GA/FSGA algorithm:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.

Set I = 1, M = 0, M0 = 50.
Initialize pc, pm.
Initialize (P(I)) and let N be its size.
Evaluate (P(I)).
While (M < M0).
Select N solutions from P(I) for mating pool using roulette-wheel selection process [15]. Let this set be P1(I).
Select solutions from P1(I) for crossover depending on pc.
Perform crossover on selected solutions to obtain population P1(I).
Select solutions from P1(I) for mutation depending on pm.
Perform mutation on selected solutions to obtain new population P(I + 1).
Evaluate (P(I + 1)).
Set M = M + 1.
If average tness of P(I + 1)>average tness of P(I) then
Set I = I + 1.
Set M = 0.
End If.
End While.
Output: Best solution of P(I).
End algorithm.

GA/FSGA Procedures:
(a) Representation: A k dimensional real vector X = (x1, x2, . . . , xk) is used to represent a solution, where x1, x2, . . . , xk represent k decision variables of the problem.
(b) Initialization: N such solutions X1, X2, X3, . . . , XN are randomly generated by random number generator. This solution
set is taken as initial population P(1). Here we take N = 50, pc = 0.3, pm = 0.2, I = 1. These parametric values are assumed
as these give better convergence of the algorithm for the model.

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

(c) Fitness value: Value of the objective function due to the solution X, is taken as tness of X. Let it be f(X). Objective
function is evaluated via fuzzy simulation process (using Algorithm 1 or Algorithm 2) for FSGA.
(d) Selection process for mating pool: The following steps are followed for this purposeP
(i) Find total tness of the population F Ni1 f X i .
(ii) Calculate the probability of selection pi of each solution Xi by the formula pi = f(Xi)/F.
P
(iii) Calculate the cumulative probability qi for each solution Xi by the formula qi ij1 pj .
(iv) Generate a random number r from the range [0, 1].
(v) If r < q1 then select X1: Otherwise select Xi(26i6N), where qi16r<qi.
(vi) Repeat steps (iv) and (v) N times to select N solutions from old population. Clearly one solution may be selected
more than once,
(vii) Selected solution set is denoted by P1(I) in the proposed GA/FSGA algorithm.
(c) Crossover:
(i) Selection for crossover: For each solution of P(I) generate a random number r from the range [0, 1]. If r < pc then
the solution is taken for crossover, where pc is the probability of crossover.
(ii) Crossover process: Crossover taken place on the selected solutions. For each pair of coupled solutions Y1, Y2 a random number c is generated from the range [0, 1] and their offsprings Y11 and Y21 are obtained by the formula:
Y11 = cY1 + (1-c)Y2, Y21 = cY2 + (1-c)Y1.
(d) Mutation:
(i) Selection for mutation: For each solution of P(I) generate a random number r from the range [0, 1]. If r < pm then
the solution is taken for mutation, where pm is the probability of mutation.
(ii) Mutation process: To mutate a solution X = (x1, x2, . . . , xk) select a random integer r in the range [1, k]. Then replace
xr by randomly generated value within the boundary of rth component of X.
3. Model formulation
3.1. Assumptions and notations
The following notations and assumptions are used in developing the model.
(i) In any production system, item is produced at a production house and distributed to the retailers through intermediate warehouses/distributors. Finally item is sold to the customers by the retailers. Here for simplicity ignoring the presence of intermediate warehouses/distributors, it is assumed that inventory system involves one
production house Ph, and n retailers.
(ii) At the beginning of each cycle item is produced at a nite rate and is continued until the produced units are sufcient to meet the customers demand during the whole cycle. Here it is assumed that p is production rate.
(iii) Normally item is distributed to the retailers from production house (Ph) in a xed interval of time(called BP) and
distributed units are sufcient to meet the demand during BP. Here it is assumed that in every T1 interval of time
(BP) item is supplied to different retailers and the supplied amount is sufcient to meet the demand for that period (T1).
(iv) Clearly total cycle length, T, is multiple, K, of BP. Let K1 times item is transferred to different retailers during production run and K2 times after production is stopped, i.e., K = K1 + K2 and so T = KT1 = (K1 + K2)T1
(v) cp is per unit production cost.
(vi) As selling price always depends on production cost, it is assumed that selling price is a markup m of production
cost cp.
(vii) cs is setup cost.
(viii) chph is holding cost per unit per unit time at Ph. There are n retailers and for i-th (i = 1, 2, . . ., n) retailer Ri, following
assumptions are made.
(ix) Due to scarcity of market places and high rent, retailers normally use a showroom at the heart of the market place
with limited capacity and a store house (having reasonable rent and sufcient capacity) away from the market
place. Here it is assumed that Ri consists of a showroom Si and a storehouse Wi. Location of Ri is at the market
place and Wi is little away from the market,
(x) Item is rst delivered to Wi from Ph. Then it is transferred to Si in a bulk release pattern in every T2i interval of
time. Finally item is sold from Si.
(xi) In every BP T1, item is transferred from Wi to Si in hi + 1 shipments including the rst shipment.
(xii) qi(t) is inventory level at Si at any time t.
(xiii) Stocks at the showroom inuence the customers to buy more and hence the demand is stock dependent. But this
psychological inuence must have an lower limit, i.e., below some level, demand will remain unchanged. Let Q0i
is the inventory level below which demand is independent of stock.
(xiv) As demand is displayed inventory dependent to keep the customer demand high replacement at every retailer
must be made above a certain stock level, called reorder level. Let Qri is reorder level at Si.
(xv) Qi is capacity at Si.

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3577

Fig. 3. Inventory levels at vendor (Ph) over time.

Fig. 4. Inventory levels Wi and Si over time.

(xvi)
(xvii)
(xviii)
(xix)
(xx)

Qwi is maximum inventory level at Wi

Zi amount of item is transferred from Wi to Si in every T2i interval of time, i.e., Zi = QiQri.
So Qwi + Zi amount of item is transferred from Ph to Ri in every T1 interval of time.
chsi and chwi are holding cost at Si and Wi respectively, where chsi > chwi.
As demand increases with displayed inventory level and decreases with increase of selling price, for simplicity
here it is assumed that, demand Di of the item at Ri linearly depends on stock and inversely depends on some
powers of selling price and is of the form

Di

8
ai bi qi
< mc
ci

for qi P Q 0i ;

: ai bi Qc0i
mcp i

for qi P Q 0i ;

where ci > 0, m > 1. Here Q0i, ai, bi, and ci are so chosen to best t the demand function.
(xxi) Transportation cost for transporting Zi units from Wi to Si is cvi + ctiZi, where cvi is cost for hiring a vehicle and cti is
additional cost for transporting per unit item.
(xxii) Item remained in stock at Ph at t = T is sold at a reduced price csr(<mcp) per unit at the production centre.
(xxiii) Here m, T1, K1, Qri(i = 1, 2, . . . , n) are decision variables.

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

A wavy bar over parameter is used to indicate fuzzy parameters. Different membership functions are available to estimate
different fuzzy parameters. These estimations are actually made by experts opinion. Here two types of membership functions
(triangular and parabolic) are used for demonstration. Other types can be used following similar manner (see Figs. 3 and 4).
3.2. Mathematical formulation of the model
In the development of the model it is assumed that item is produced at Ph and transferred to different retailers in every T 1
interval of time. Item is produced for a period K1T1 and is distributed to the retailers in K1 + K2 shipments. So T = (K1 + K2)T1.
Units remained at Ph at T are sold at a reduced price. At every T 1 interval of time, an amount of Qwi + Zi is transferred from Ph
to Ri, among which Qwi is stored at Wi and remaining Zi is stored at Si which increases the inventory level of Si to Qi. Item is
sold from Si and when its inventory level goes down to Qri another amount Zi is transferred from Wi. It continues for hi subcycles and in the last sub-cycle units remained at Wi(6Zi) is transferred to Si. At the end of time T1 inventory level at Si becomes Qri and next lot is delivered by the vendor for the retailers.
According to the assumptions total amount of item transferred to different retailers in every T1 interval of time is
Pn
i1 Q wi Z i . So

6 K 1 pT 1 7
7  K 1:
K 2 Integral part of 6
n
4P
5
Q wi Z i

i1

3.2.1. Formulation for i-th retailer

For every retailer two cases may arise- Case-1: Q0i > Qri, Case-2: Q0i6Qri.
Case-1: In this case Q0i > Qri, so instantaneous state qi(t) of stock level at any time t(06t6T2i) is given by

8
ai bi qi t
0 6 t 6 T 0i ;
dqi t <  mcp ci ; Q 0i 6 qi ;

:  ai bi Qc0i ; Q ri 6 q 6 Q 0i ; T 0i 6 t 6 T 2i ;
dt
i
mcp i

10

with the boundary conditions qi(0) = Qi, qi(T0i) = Q0i, qi(T2i) = Qri.
Solving (10) we get



mcp ci
ai bi Q i
log
;
bi
ai bi Q 0i


Q 0i  Q ri
T 2i T 0i mcp ci log
:
ai bi Q 0i

T 0i

11
12

Then according to the assumptions

hi Integral part of


T1
1:
T 2i

13

So during T1, there are hi sub-cycles, among which (hi-1) are full sub-cycles each having length T2i and length of last sub-cycle is

T li T 1  hi  1T 2i :

14

Clearly item transferred from Wi to Si in the last shipment

Z li Q wi  hi  2Z i :

15

Now two sub-cases may ariseSub-case1: In this case inventory level at Si exceeds Q0i after last shipment from Wi, i.e., Tli > (T2i-T0i). Let at t = T3i inventory level reaches Q0i. Then for last sub-cycle we have

8
ai bi qi t
hi  1T 2i 6 t 6 T 3i ;
dqi t <  mcp ci ; Q 0i 6 qi ;

:  ai bi Qc0i ; Q ri 6 q 6 Q 0i ; T 3i 6 t 6 T 1 ;
dt
i
mcp i

with the boundary conditions qi((hi-1)T2i) = Zli + Qri, qi(T3i) = Q0i, qi(T1) = Qri.
Solving (16) we get



T 3i hi  1T 2i

mcp ci
ai bi Z li Q ri
log
ai bi Q 0i
bi

and T 3i T 1  mcp ci

16

Q 0i  Q ri
:
ai bi Q 0i

Combining these two we have

Z li






1
T li bi
Q 0i  Q ri
ai bi Q 0i  exp

b

a
 Q ri :
i
i
bi
ai bi Q 0i
mcp ci

17

D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

3579

Sub-case2: In this case inventory level at Si does not exceed Q0i after last shipment from Wi, i.e., Tli6 (T2i-T0i). Then for last
sub-cycle we have

dqi t
ai bi Q 0i
;

dt
mcpci

Q ri 6 qi 6 Q ri Z li 6 Q 0i ;

hi  1T 2i 6 T 1 ;

18

with the boundary conditions qi((hi-1)T2i) = Zli + Qri, qi(T1) = Qri.

Solving we get

Z li

ai bi Q 0i
T li :
mcp ci

19

Combining two sub-cases we have

Q wi hi  2Z i Z li :

20

Due to symmetry holding cost in rst (hi-1) sub-cycles at Si = (hi-1)chsiH1, where H1 is given by

H1

T 0i

qi tdt

T 2i

T 0i

"
#



mcp ci
ai
ai bi Q 0i
mcp ci
Q 20i  Q 2ri
:
qi tdt
Q i  Q 0i log

bi
bi
ai bi Q i
ai bi Q 0i
2

21

Similarly holding cost in last sub-cycle at Si = chsiH2, where H2 is given by

8
h

i
h 2 2i
ci
Q Q
mc ci
ai bi Q 0i
>
< mcbp Z li Q ri  Q 0i bai log a b
ai bpi Q 0i 0i 2 ri ; for T li > T 2i  T 0i ;
i
i
i
i Z li Q ri
H2
h
i
2
2
c
>
: mcp i Zli Q ri Q ri ;
for T li 6 T 2i  T 0i ;
a b Q
2
i

22

0i

So total holding cost during [0, T1] at Si = chsi{H1(hi-1) + H2}.

Case-2: In this case Q0i6Qri, so instantaneous state qi(t) of stock level at any time t(06t6T2i) is given by

dqi t
ai bi qi t
;

dt
mcp ci

0 6 t 6 T 2i ;

23

with the boundary conditions qi(0) = Qi, qi(T2i) = Qri.

For last sub-cycle, instantaneous state qi(t) of stock level at any time t((hi-1)T2i6t6T1) is given by

dqi t
ai bi qi t
;

dt
mcp ci

hi  1T 2i 6 t 6 T 1 ;

24

with the boundary conditions qi((hi-1)T2ii) = Zli + Qri, qi(T1) = Qri. Solving above two equations we have



mcp ci
ai bi Q i
log
;
bi
ai bi Q ri


ci
mcp
ai bi Z li Q ri
;
log
T li
ai bi Q ri
bi




1
bi T li
ai bi Q ri exp
Z li
ci  ai  Q ri :
bi
mcp
T 2i

25
26
27

So total holding cost during [0, T1] at Si = chsi{H1(hi -1) + H2}, where




mcp ci
ai
ai bi Q ri
Q i  Q ri log
;
bi
bi
ai bi Q i



mcp ci
ai
ai bi Q ri
Z li log
:
H2
bi
bi
ai bi Z li Q ri
H1

28
29

In both the cases holding cost during [0, T1] at Wi = chwiH3, where

H3 fhi  2Z i Z li gT 2i fhi  3Z i Z li gT 2i    fZ i Z li gT 2i Z li T 2i

Z i T 2i hi  1hi  2
hi  1T 2i Z li :
2

30

Transportation cost for transporting the item from Wi to Si during 0; T 1 ,

CT i hi  1cv i cti Z i cv i cti Z li hi cv i Q wi Z i cti :

Sell revenue during [0, T1] at Ri = mcp(Qwi + Zi).

31

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

3.2.2. Formulation for production house (Ph)

Cycle length T = (K1 + K2)T1. Production cost = pK1T1cp.
P
Sell revenue from Ph = Selling price of the amount of item in stock at t T fK 1 T 1p  K 1 K 2 ni1 Z t Q wi gcsr .
Holding cost during production run = chphHCP1, where

(
K 21 pT 21  K 1 K 1  1T 1

HCP 1

)
n
X
Q wi Z i =2:

32

i1


P
After production run item remains at Ph is K 1 pT 1  ni1 Q wi Z i .
So total holding cost after production run = chphHCP2, where

"
K 1 K 2 pT 21

HCP 2

#
n
X
 T 1 fK 1 K 2 K 2 K 2  1=2g
Q wi Z i :

33

i1

3.2.3. Calculation of average prot

Total prot from the whole system for every time interval (K1 + K2)T1, F = <Sell revenue><production cost><holding
cost><setup cost><transportation cost>.

"(
F

mcp K 1 K 2
"

n
X
Q wi Z i

K 1 T 1 p  K 1 K 2

) #
n
X
Z i Q wi csr  K 1 T 1 pcp 

i1

 chph HCP1 HCP 2

i1
n
X

chsi fhi  1H1 H2 g

i1

n
X

chwi H3  cs  K 1 K 2

i1

n
X

CT i :

34

i1

3.2.4. Crisp model

When all the inventory parameters are crisp, then problem is reduced to determine the values of m, T1, K1, Qri(i = 1, 2, . . . , n)
to

Maximize Zm; T 1 ; K 1 ; Q r

F
;
K 1 K 2 T 1

where Q r Q r1 ; Q r2 ; . . . ; Q rn :

35

3.2.5. Fuzzy model

In the real world, holding cost, setup cost, transportation cost are vaguely dened in some situations. So we take
e
chph, chwi, chsi, cs, cti as fuzzy numbers ~chph ; ~chwi ; ~chsi ; ~cs ; ~cti respectively, which transform Z to Z.
According to above assumptions the above problem (35) reduces to

e
Maximize Zm;
T1; K1; Q r

Fe
;
K 1 K 2 T 1

36

where

"(
e
F

n
X
mcp K 1 K 2
Q wi Z i

"

) #
n
X
K 1 T 1 p  K 1 K 2
Z i Q wi csr  K 1 T 1 pcp 

i1

 ~chph HCP1 HCP 2

i1
n
X
i1

~chsi fhi  1H1 H2 g

n
X

~chwi H3  ~cs  K 1 K 2

i1

n
X

CT i :

37

i1

e is not well dened. In this case following Section 2.1, one can
Then as discussed in Section 2.1, the statement maximize Z
e with some degree of optimism(pessimism)
maximize an optimistic(pessimistic) return value Z for the objective function Z
a1(a2). So the problem can be reduced to the following chance constrained programming problem, where objective function
is optimized with some degree of possibility or necessity according to decision makers(DMs) requirement.
Model F1: Determine the values of m, T1, K1, Qri (i = 1, 2, . . . , n) to

Maximize Z;

38

e > Z P a1 :
Subject to pos Z
Model F2: Determine the values of m, T1, K1, Qri (i = 1, 2, . . . , n) to

Maximize Z;
e > Z P a2 :
subject to nes Z

39

D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

3581

If fuzzy parameters are considered as triangular fuzzy numbers (TFNs) ~chph  chph1 ; chph2 ; chph3 ; ~chwi  chwi1 ; chwi2 ; chwi3 ;
e is also a TFN. Then
~chsi  chsi1 ; chsi2 ; chsi3 ; ~cs  cs1 ; cs2 ; cs3 ; ~cti  cti1 ; cti2 ; cti3 , then according to fuzzy extension principle (3), Z
using Lemmas 1 and 2, the problem (38) and (39), can be reduced to (40) and (41) respectively.

e
Z;

40

Z3  Z
P a1 ;
Z3  Z2
Maximize Z;

41

Maximize
subject to

Z  Z1
subject to
6 1  a2 ;
Z2  Z1
F

where Z j K 1 Kj 2 T 1

"(

Fj

n
X
mcp K 1 K 2
; Q wi Z i

"

) #
n
X
K 1 T 1 p  K 1 K 2
Z i Q wi csr  K 1 T 1 pcp 

i1

i1

 chph4j HCP 1 HCP 2

n
X

chsi4j fhi  1H1 H2 g

i1

 cs4j  K 1 K 2

n
X

#
chwi4j H3

i1

n
X
fhi cv i Q wi Z i cti4j g;

j 1; 2; 3:

i1

Which are again equivalent to problems (42) and (43) respectively.

Maximize Zm; T 1 ; K 1 ; Q r a1 Z 2 1  a1 Z 3

where Q r  Q r1 ; Q r2 ; . . . ; Q rn ;

42

Maximize Zm; T 1 ; K 1 ; Q r a2 Z 1 1  a2 Z 2 where Q r Q r1 ; Q r2 ; . . . ; Q rn :

43

The problems (42) and (43) are solved using GA.

e In
If fuzzy parameters are considered as PFNs, then it is very difcult to get analytical form of membership function of Z.
that case problems (38) and (39) can be solved using FSGA as discussed in Sections 2.2 and 2.3. Similarly for other type of
fuzzy numbers optimal decision can be made using FSGA.
4. Solution procedure
4.1. Crisp model
Following steps are used to calculate objective function and determine optimal decision for the crisp model.
1.
2.
3.
4.
5.

Randomly generate values of m(>1), T1, K1, Qr1, Qr2, . . . , Qrn. These values represent an initial solution.
Determine objective value (prot) F using steps 38.
Determine K2 using formula (9).
Set sum1 = 0, sum2 = 0, sum3 = 0, sum4 = 0.
For i = 1, 2, . . . , n do
(a) if(Q0i > Qri)
(i)
Calculate T0i, T2i, hi, Tli using formulas (11)(14) respectively,
(ii)
if Tli > (T2i-T0i)
Calculate Zli using formula (17).
else
Calculate Zli using formula (19).
(iii) Calculate Qwi, H1 and H2 using formulas (20)(22) respectively.
(b) if(Q0i6Qri)
(i)
Calculate T2i, hi, Tli, Zli using formulas (25), (13), (26) and (27) respectively.
(ii)
Calculate Qwi, H1 and H2 using formulas (20), (28) and (29) respectively.

(c) Calculate H3, CTi using formulas (30) and (31) respectively.
(d) Set Sum1 = Sum1 + (QWi + Zi), Sum2 = Sum2 + chsi{(hi-1)H1 + H2},Sum3 = Sum3 + chwiH3,Sum4 = Sum4 + CTi.
6. End For.
7. Calculate HCP1 and HCP2 using formulas (32) and (33) respectively.
8. F mcp K 1 K 2 Sum1 fK 1 T 1 p  K 1 K 2 Sum1gcsr K 1 T 1 pcp  chph HCP1 HCP2  Sum2  Sum3  cs  K 1 K 2 Sum4.
9. Z K 1 KF 2 T 1 .

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

10. Determine optimum values of m, T1, K1, Qr1, Qr2, . . . , Qrn, Z using GA.
11. Output: Optimum/near-optimum values of m, T1, K1, Qr1, Qr2, . . . , Qrn, Z.
12. End Algorithm.
4.2. Fuzzy model
As discussed in Section 3.2.5, when fuzzy parameters are TFNs, then fuzzy models F1, F2, i.e., problems (38) and (39) are
equivalent to problems (42) and (43) respectively, which can be solved following same procedure of Crisp model. Three come can be obtained following steps 39, of the above algorithm and using respective
ponents Z1, Z2, Z3 of objective function Z,
components of fuzzy parameters. Then value of Z can be obtained from formula (42) or (43). Finally optimum values of
m, T1, K1, Qr1, Qr2, . . . , Qrn, Z can be obtained using same GA. When analytical form of membership function of fuzzy objective
function can not be available, then to solve (38) and (39) fuzzy simulation process (Algorithms 1 and 2 of Section 2.2 respectively) has to be followed. In that case for a particular set of values of fuzzy parameters objective function value is determined following same procedure of crisp model.
5. Numerical illustration
The models are illustrated for two retailers, i.e., for n = 2.
5.1. Crisp model
Crisp model is illustrated using the following example.
Example 1. In this example parametric values for two retailers are given in Table 1. Other parametric values are:
cs = $1500, chph = $0.02, cp = $1.5, p = 250, csr = $1.5.
For the above example (Example 1) crisp model (35) is solved using GA and results are presented in Table 2.
Results are obtained due to different price elasticity c = c1 = c2 and presented in Table 3. It is observed that prot
decreases with increase of c. It happens due to the fact that increase of c1, c2 decreases the demand at the retailers which
inturn decreases the prot.
5.2. Fuzzy model
To discuss the fuzzy model following two examples are used.
Example 2. Here all the fuzzy parameters are assumed as TFNs and their assumed values are: chph 0:015; 0:02; 0:25;
~chwl 0:02; 0:03; 0:04; ~chw2 0:02; 0:03; 0:04; ~chs1 0:04; 0:05; 0:06; ~chs2 0:04; 0:05; 0:06; ~cs 1450; 1500; 1550;
~cn 0:005; 0:01; 0:015; ~ct2 0:005; 0:01; 0:015:a1 0:9; a2 0:05. All other parametric values are same as assumed in
Example 1.

Table 1
Different parametric values for two retailers.
Retailer(i)

ai

bi

ci

Qi

Q0i

chwi

chsi

cvi

cti

1
2

420
440

6
5

2.5
2.5

35
37

10
12

0.03
0.03

0.05
0.05

2.0
2.2

0.01
0.01

Table 2
Results of Example 1 using GA.
Qr1

Qr2

T1

K1

15.23

17.07

2.08

1.19

12

42.87

Table 3
Results of Example 1 due to different c(=c1 = c2).

2.51

2.52

2.53

2.54

2.55

41.80

40.82

40.05

39.01

38.19

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

Table 4
Results of Example 2 using GA and FSGA.
Model

Method

Qr1

Qr2

T1

K1

F1

GA
FSGA

14.81
13.15

16.61
14.93

2.06
2.03

1.19
1.26

12
12

43.73
43.66

F2

GA
FSGA

17.01
16.01

18.82
17.84

2.24
2.28

1.29
1.43

8
7

28.65
28.62

Table 5
Results of Example 3 using FSGA.
Model

Qr1

Qr2

T1

K1

F1
F2

17.06
19.97

14.88
21.89

1.94
2.57

2.06
1.32

7
4

67.51
26.44

Table 6
Results in Examples 2 and 3 due to different degree of optimism a1.

a1
Z

Example 2
Example 3

0.92

0.94

0.96

0.98

1.00

43.58
67.34

43.29
66.92

43.20
66.56

43.01
66.04

42.83
65.06

Table 7
Results in Examples 2 and 3 due to different degree of pessimism a2.

a2
Z

Example 2
Example 3

0.052

0.054

0.056

0.058

0.06

28.13
25.89

27.45
25.40

27.09
24.92

26.47
24.42

25.85
24.00

In this case problem (38) and (39) are transformed into (42) and (43) respectively and solved following GA and results are
presented in Table 4. In this case problems (38) and (39) are directly solved using FSGA also and results are presented in
Table 4.
It is clear from Table 4, that for assumed parametric values in Example 2, the results obtained through both the GA
method and FSGA technique are almost same for both the models F1 and F2. But GA can be applicable if the model can be
transformed into an equivalent crisp problem.
Example 3. Here all the fuzzy parameters are assumed as PFNs and their assumed values are: ~chph
0:015; 0:02; 0:22; ~chwi 0:02; 0:025; 0:03; ~chw2 0:02; 0:025; 0:03; ~chs1 0:04; 0:045; 0:05; ~chs2 0:04; 0:045; 0:05; ~cs
950; 1000; 1025; ~ct1 0:005; 0:01; 0:012; ~ct2 0:005; 0:01; 0:012; c 2:4; a1 0:9; a2 0:05. All other parametric
values are same as assumed in Example 1.
In this case problem (38) and (39) can not be transformed into equivalent crisp problems and so are solved following
FSGA only and results are presented in Table 5.
For both the examples- Examples 2 and 3, results are obtained using FSGA due to different degree of optimism a1 of the
objective function and results are presented in Table 6. In both the cases it is observed that prot decreases with increase of
a1, which agrees with reality.
For both the examples Examples 2 and 3, results are obtained using FSGA due to different degree of pessimism a2 of the
objective function and results are presented in Table 7. In this case also same trend of result is obtained.

6. Discussion
Two warehouse vendor-retailers, fuzzy models have been solved through GA and FSGA methods using fuzzy chance constraint programming technique. It is observed that the result obtained through FSGA is almost equal to that obtained via GA.
But GA is applicable only when the problem is reducible to equivalent crisp model. On the other hand FSGA can be applied to
the problems involving different imprecise parameters. We found the solution of the fuzzy model using two different examples and two different types of fuzzy parameters. Similarly solutions of the other types of imprecise parameters can be found.

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D. Panda et al. / Applied Mathematical Modelling 34 (2010) 35713585

7. Practical implications and limitations

A production inventory model may be taken to demonstrate how the proposed model works. Let a manufacturer produces
rice from paddy in his rm and supplies to few retailers located at different markets of the city. Location of rm is outside the
city. In every week or biweek he hire a vehicle and supplied rice to the retailers. As retailers do their business at the heart of
the market place they hire a small outlet at the market to sell the item and a relatively large godown having less rent away
from the market. When suppler supplies the item it is stocked at the godown and are transferred to market outlet according
to capacity. Obviously demand of rice directly depends on stock level and inversely on selling price. If selling price increases
then prot from per unit selling unit increases for retailers. But increase of selling price decreases demand which in turn
decreases prot of retailers as well as the manufacturer. So determination of optimal per unit selling price is very important.
Again though increase of reorder level at market outlet increases demand, it increases holding cost. Which implies determination of reorder level of stock is also vital issue. Hence prot of both the retailers and the manufacturer is interrelated. So to
benet both the manufacturer as well as retailers, the total prot from whole integrated system has to be optimized. Though
integrated prot maximization is benecial for both the retailers and the manufacturer, they normally does not follow it due
to lack of integration or ignorance. Present model can be applied to these realistic situations. This model will help the manufacturer to determine optimal basic period of supply the items and optimal duration of production. On the other hand
retailers will be benetted by determining optimal reorder point and order quantity. Here, an inventory control example
involving a rice mill and its retailers has been taken into account. Similarly a lot of realistic inventory control problems
may be formulated and solved by the present methodology. Advantages of the proposed model over existing two-storage
models is manyfold:
 Existing two-storage models ignores the benets of manufacturers/ suppliers and only concentrated on the prot of
retailers, which is unrealistic as prots of both the manufacturer and retailers are correlated.
 These models normally concentrate on closed form solution. As a result they areconned with simple assumptions like
constant demand, TFN type fuzzy parameters, etc., which normally does not agree with real life situations.
 Consideration of different types fuzzy parameters makes the model more realistic as at present complex situation most of
the inventory cost are imprecise in nature.
 As mentioned, the existing fuzzy models estimates the parameters as TFN typesfor easy of calculation. But in most of the
real situation membership functionof fuzzy parameters are different types. As, proposed methodology can deal with any
type of fuzzy parameters related to these type of inventory control problems, it may help the decision makers to deal their
problems more easily with higher accuracy.
 At length, the model gives decision for both the optimistic and pessimistic decision makers, which is normally not
observed in the existing warehouse inventory models with fuzzy parameters.
Also the proposed model has some limitations:
 The model will be applicable only if coordination between the manufacturer and the retailers is made. Both the managements have to interchange information transparently to get the benet using the model.
 Management of small retailers are not sufciently skilled to deal with these types of soft computing method. Moreover, in
most of the cases they have not expertise to estimate different fuzzy costs accurately. But this limitation can be overcome
if management of manufacturer helps the retailers for global interest.
 Sufcient past data is required to estimate the demand parameters ai and bi, which are normally not preserved by the
retailers.
 Finally as heuristic method is applied to solve the model, normally near optimal solution is obtained by the method for
both the optimistic and pessimistic decision makers.
8. Conclusion
Here for the rst time a single vendor multiple retailer model is developed in an imprecise environment where demand
of the item increases with stock and decreases with selling price. Also for the rst time two-storage facility of retailers is
incorporated in vendor-retailers models. A methodology is proposed to deal with imprecise objectives involving different
types of fuzzy parameters. Two different approaches are followed to solve the model using different examples. It is found
that FSGA can be used successfully to solve this type of problems in different complicated situations. The methodology
presented here is quite general and can be applied to solve optimization problems in different elds of science and
technology.
Acknowledgement
This research is supported by University Grants Commission of India by Grant number PSW-162/06-07. The authors
thank the Honorable Reviewer for the valuable comments to improve the quality of the paper.

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