A Two Echelon Subsutable Inventory Model for Deteriorating Items

This paper presents continuous review two-echelon inventory systems with two different substitutable items in stock. The demand for the products follows independent Poisson with rates λ1 and λ2 respectively for product and A and B. The operating policy at the lower echelon for the products are (si , Si) that is whenever the inventory level drops to ‘si’ on order for Qi = (Si-si) items is placed, the ordered items are received after a random time which is distributed as exponential. We assume that the demands accruing during the stock-out period are lost. The retailer replenishes the stock of products from the supplier which adopts (0,Mi) policy. The joint probability disruption of the inventory levels of the products, at retailer and the products at supplier are obtained in the steady state case. Various system performance measures are derived and the long run total expected inventory cost rate is calculated. Several instances of numerical examples, which provide insight into the behavior of the system, are presented.