A multiproduct EOQ model with permissible delay in payments and shortage within warehouse space constraint: a genetic algorithm approach

Abstract

In today's business transactions, sometimes customers are allowed to pay in a grace period, i.e., permissible delay in payment occurs. This policy is advantageous both for the suppliers and for the customers. This paper formulates a multi-product economic order quantity (EOQ) problem with an order-quantity-dependent permissible delay in payment. In this problem, the shortage is backlogged and there is a warehouse constraint. We show that the model of the problem is a constrained nonlinear-integer-program and propose a genetic algorithm (GA) to solve it. Moreover, a statistical approach is employed to calibrate the parameters of the GA. A numerical example is presented at the end to not only demonstrate the application of the proposed parameter-tuned GA, but also to verify the results and to show GA performs better than a simulated annealing (SA) approach.