An Integrated Inventory Model for Two Products with Internal and External Demands

In this study we have proposed an integrated inventory model for two products having fixed demand. One of the aforementioned products is assumed to be an ingredient for the other product and having an independent demand in the market. The output of the proposed model is the economic level for producing the products with minimum costs. Considering the relations among parameters in the model, the Total cost optimization algorithm for finding the optimum amount of the variables is discussed in addition to a numerical example and its sensitivity analysis. Based on the sensitivity analysis, when one of the products is playing two roles, as indicated above, any change in cost-based and non-cost-based parameters can affect the decision variables of both products. The proposed model is usable for various industries as dairy, pipe and cloths manufacturing.