Analysis and demonstration of the problem of integer about the order batch in EOQ Model

Abstract

There are two problems in the economic order quantity (EOQ). The first one is that as the average amount of purchase is considered as the argument of the total inventory cost (TC) 1function, the calculated result of the purchase batch cannot be an integer, thus leading to the calculated result of TC less than its actual result. The other problem is that during the establishment of EOQ model, the fact that the amount of every purchase is variable is neglected, making the warehouse cost(WC) of each batch different, therefore, considering the average amount of purchase as every single amount of purchase is short of evidence. From the above analyses, this paper considers the order batch as the argument to build a new TC function and to analyze and demonstrate the three parts of this function respectively(the raw materials cost, order cost, warehouse cost) so as to find out the optimal expression for them. As a result, a new expression of the TC function can be determined and the EOQ model can be revised. Finally, with instants, this paper computes the result of key factors respectively based on the new model and the original model, and then compares advantages and disadvantages of these two models.