Abstract

This article formulates a mathematical model, in which the price of goods is going up in the near future and the warehouse capacity is constrained, how to decide the optimal ordering policy for cost saving is an important issue. We assume that decision maker can order at any time, but we don't allow backordering, consider that the warehouse capacity is constrained. We can consider the rental warehouse when our internal warehouse is full. We construct mathematical cost saving model. By applying the optimization technique, we find out the optimal ordering quantity to minimize the total inventory cost or cost saving. Finally four conclusions are drawn for future applications and studies.