EOQ Model: The Case in Which the Placing of Orders Is Rewarded

Abstract

The first models of optimization of inventory management costs have undergone few changes since they were developed at the beginning of the last century. It is only with the passage of time that new scenarios have appeared with the introduction of new systems of production, and consequently of new strategies in the logistics chain. In this article, we analyze and propose a revision of the basic inventory model of economic order quantity first defined by Harris in 1913 for a scenario in which the owner of the stock receives a bonus or reward each time he replenishes his stock. This situation arises when the supplier receives a benefit which he then shares with the customer when managing his stock replenishment. An array of nested models is shown to illustrate this scenario, from which the constraints of previous scenarios have been removed. The model provides insights into the negotiation of batch size between supplier and buyer in a win-win environment in the specific situation in which the supplier gives a bonus to the buyer at each stock replenishment. © 2011 Wiley Periodicals, Inc.