Traditional Economic Order Quantity Model Research Articles

A sustainable inventory model for defective items under fuzzy environment

Ever since the basic Economic Order Quantity (EOQ) model was introduced, several researchers and academicians extended and/or altered it, to reduce its unrealistic assumptions and make it more suitable and appropriate to the real world. The traditional EOQ Models assume constant demand and perfect quality of all the items received in a lot from the manufacturer and do not help decision-makers build their lot size taking environmental issues into consideration. The article’s main objective is to provide models to support managers in taking decisions that are made in an ecologically responsible manner. The proposed models may be used to optimize inventory operations where varying demand and environmental expenses can be accounted for. The article, thus, hypothesizes a production/inventory situation that considers that the items received by the retailer from the supplier may have a portion of items with subpar quality and that the demand is not always precisely known. Also, understanding the fact that the emission of Carbon is one of the critical factors causing global warming, focus on carbon emission reduction has become a concern for all. The current paper incorporates the cost of carbon emission from warehouse electricity and from fuel used in generators. A numerical example has been presented to support the proposed model. Sensitivity analysis has also been conducted on the effective parameters to know the robustness of the model.

A fuzzy economic order quantity model with credibility induced demand and shortages

The purpose of this study is to explore the research for a decision-maker to minimise the total cost of the newly launched products of good quality and to control the inventory introduced in the market. This research provides the modification way of the stock to regulate the inventory management of the retailer. Due to the uncertainty in the marketplace, various parameters like a shortage, ordering, and deteriorating cost not fixed in nature. So, it is difficult to obtain the proper estimate of such costs. In this paper, we develop a traditional economic order quantity model with a fuzzy approach and provide a suitable structure to handle such uncertain parameters, improving the exactness and computational efficiency of the inventory system. The optimal solution of the problem is done with the method of graded mean integration. The model illustration is demonstrated through the appropriate numerical and sensitivity analysis.

Economic order quantity for perishables with decreasing willingness to purchase during their life cycle

In an inventory management model for perishables, depletion due to interacting with the demand is of importance, but also, damage to products is a relevant variable. This article considers that demand and sales phenomena do not always go hand-in-hand. The demand process relates to the willingness to acquire products in good condition, giving the customer the power to evaluate the quality of the product before an effective purchase takes place. We also considered the cost of disposing of unsold units, besides the conventional costs for storage and procurement. We then proposed a mathematical model to derive the Economic Order Quantity (EOQ) under specific conditions, in order to minimize the expected management cost of perishables, assuming constant demand and linearly decreasing purchase probability during the product life cycle. We proposed several random instances and validate the mathematical model using simulation. We then found the optimal parameters for the inventory policy using a third-order numerical approximation. Last, we developed a sensitivity analysis over the product life cycle to prove that the proposed model approximates to a traditional EOQ model for perishables when life cycle is sufficiently large.

Economic order quantity for joint complementary and substitutable items

In real-world situations, substitution may occur in the event of a product stock-out, and some products are complements with others. However, the classical inventory models ignore these conditions. This paper addresses an economic order quantity (EOQ) model to determine the joint ordering policy for two products under completion and substitution conditions. The proposed model determines order quantities for two products in order to optimize the total cost of inventory, including setup and holding costs. To formulate the problem, two special cases are discussed and analyzed in detail. Furthermore, the pseudo-convexity of the total cost functions is derived, and then a solution procedure is suggested. Numerical examples are presented and an analysis of sensitivity is conducted, using Matlab and Lingo solver, in order to investigate the impact of input parameters on the optimal policy. The results show that proposed model saves the costs as opposed to the traditional EOQ model.

Carbon Footprint and Order Quantity in Logistics

Purpose: Even without economic factors and government regulations, the pressure and motivation of corporation to reduce emission are still increasing. This is because the key factors for corporation to reduce emissions have become corporate social responsibility and identification of low-carbon value by consumer and society from economic trade-off and government regulations. So, the purpose of this paper is to provide quantity methods for the logistics organizations with wish of voluntary reduction and social responsibility. Design/methodology/approach: Being difference from the traditional research that takes economic value as object, this paper takes carbon footprint as object directly, order quantity as decision variable. By referring to the traditional economic order quantity model, the paper creates logistics carbon footprint model which takes transport and inventory into account. Then it solves the model by calculating the values of order quantity, carbon footprint and revenue using the method of optimization. Findings and Originality/value: By solving and comparing the two models of economic order quantity model and carbon footprint model, it gets some results, such as carbon optimization order quantity, the effects order quantity deviating from economic order quantity or carbon order quantity having on economic or carbon footprint values, which can give some meaningful insight for corporation to search out reduction opportunities by operations adjustment. Originality/value: The study takes carbon footprint as object directly and creates the corresponding quantity model. By comparing with the traditional economic order quantity model, the paper provides quantity methods and obtains some meaningful insights for the logistics organizations with wish of voluntary reduction and social responsibility to reduce emissions by operations adjustment.

The optimal retailer's ordering policies with trade credit financing and limited storage capacity in the supply chain system

The traditional economic order quantity model assumes that the retailer's storage capacity is unlimited. However, as we all know, the capacity of any warehouse is limited. In practice, there usually exist various factors that induce the decision-maker of the inventory system to order more items than can be held in his/her own warehouse. Therefore, for the decision-maker, it is very practical to determine whether or not to rent other warehouses. In this article, we try to incorporate two levels of trade credit and two separate warehouses (own warehouse and rented warehouse) to establish a new inventory model to help the decision-maker to make the decision. Four theorems are provided to determine the optimal cycle time to generalise some existing articles. Finally, the sensitivity analysis is executed to investigate the effects of the various parameters on ordering policies and annual costs of the inventory system.

The optimal inventory policies for the economic order quantity (EOQ) model under conditions of two levels of trade credit and two warehouses in a supply chain system

An inventory problem involves a lot of factors influencing inventory decisions. To understand it, the traditional EOQ model plays rather important role on inventory analysis. Although the traditional EOQ models are still widely used in industry, practitioners frequently question validities of assumptions of these models such that their use encounters challenges and difficulties. So, this paper tries to present a new inventory model by considering two levels of trade credit and two warehouses together to relax the basic assumptions of the traditional EOQ model to improve the environment of the use of it. Keeping in mind cost-minimization strategy, three easy-to-use theorems are developed to characterize the optimal solutions. Finally, the sensitivity analysis is executed to investigate the effects of the various parameters on ordering policies and the annual total relevant costs of the inventory system. Key words: Economic order quantity (EOQ), permissible delay in payment, trade credit, two warehouses, supply chain system.

An analysis of flexibility and quality improvement in a quality-adjusted EOQ model with finite-range stochastic lead-time

Traditional Economic Order Quantity (EOQ) model operates under a series of highly restrictive assumptions, including, but not limited to, the assumptions of deterministic lead-time, perfect quality, and constant setup cost. Many variants of the traditional EOQ model have been developed as a result of relaxing one or more of these assumptions. These variants include a quality-adjusted EOQ model with finite-range stochastic lead-time which relaxed the deterministic lead-time and perfect quality assumptions. Utilizing the basic framework of the quality-adjusted model, the authors also considered the option of investment to improve the quality and obtained closed form relationships for the quality-adjusted and quality improvement models. This paper extends the previous work by investigating two additional models; one aimed at improving flexibility, through setup reduction, and the second considering the strategy of simultaneous investment in flexibility and quality improvement. Analytical and numerical results are presented for both models. These results indicate that significant savings over the quality-adjusted EOQ model with finite-range stochastic lead-time are realized for both the flexibility improvement and simultaneous models.

Economic order quantity model with innovation diffusion criterion having dynamic potential market size

Introduction of a new product in the market forces the inventory managers to consider the effects of marketing policies especially for innovation effects at the earlier stage of the product life cycle to make the economic order quantity (EOQ) model more realistic. Traditional EOQ models generally do not consider the effect of marketing parameters. In this paper, a time dependent innovation driven demand model has been introduced in the basic EOQ model to calculate the different optimal policies. This model assumes that potential market size is dynamic over time. The proposed model acknowledges relationship between the innovation coefficient and the optimal policies. The effectiveness of this model is illustrated with a numerical example and sensitivity analysis of the optimal solution with respect to different parameters of the system is performed.

Rethinking tradeoffs and OR/MS methodology

The purpose of this paper is to explore the role of a process known as the ‘evaporating cloud’ (EC) as a way of enhancing OR/MS modelling. While other authors have described the use of the EC process to explore the tradeoffs in a traditional Economic Order Quantity model, this paper demonstrates the use of the EC with a facilities location problem, which was originally solved via mixed integer programming. We relate our findings to OR/MS modelling in general, and argue that the EC could contribute effectively to different phases of the problem-solving process, for example, aiding the problem-structuring phase and helping to find better solutions in many OR/MS modelling situations. We demonstrate that the EC is a valuable tool to use in modelling practice as a problem-structuring tool, as a way of dealing specifically with tradeoffs, and that it can therefore be a useful complement to OR/MS methodology, and contribute to OR/MS practice and teaching.

Economic order quantity model and Taguchi’s cost of poor quality

In this paper we consider defective products and Taguchi’s cost of poor quality in the economic order quantity (EOQ) model. We assume that the product quality performs a normal distribution function, and the Taguchi’s poor quality cost has been involved. From our analysis, it has been found that the annual profit will be decreased if the poor quality of product and Taguchi’s quality cost are involved in the model. It has also been found that economic order quantity in our model is larger than that in a traditional EOQ model.

A probabilistic approach for traditional EOQ model

The purpose of this article is to reconstruct the traditional EOQ model by considering the total demand is random. It can be shown that the result of this model is equivalent to the traditional ones. And finally, we find, that the economic order quantity (EOQ) should be reinterpreted as expected economic order quantity (EEOQ).

Effect of deteriorating items on the instantaneous replenishment model with backlogging

The physical characteristics of stocked items dictate the nature of inventory policies implemented to manage and control. Traditional economic order quantity models (EOQ) assume that items stocked preserve their characteristics while in inventory and some of them do not allow planned shortages. As this assumption arises the question of how reliable the EOQ models are when items stocked deteriorate over time. This paper introduces a modified EOQ model in which it assumes that the stocked items are governed by a deterioration factor due to their nature and where the carrying cost is very expensive such that planned shortages may be advisable. A mathematical model is developed and a numerical example is provided to illustrate the solution procedure.

Effect of deteriorating items on the instantaneous replenishment model

The physical characteristics of stocked items dictate the nature of inventory policies implemented to manage and control. The traditional economic order quantity model (EOQ ) assumes that items stocked preserve their characteristics during their stay in inventory. The question is how reliable are the EOQ modelswhen items stocked deteriorate over time. This paper introduces a modified EOQ model in which it assumes that a percentage of the on-hand inventory is wasted due to deterioration. A mathematical model is developed and numerical examples provided to illustrate the solution procedure.

A Logistics‐based Inventory Model for JIT Procurement

Although some recent articles have extended the traditional economic order quantity models to JIT purchasing, their value is limited by the simplistic nature of the underlying assumptions. Implementation of JIT procurement is a lengthy and complex process and it is important to recognize the interrelationships between the investments in the different subsystems of the procurement system to suit JIT and the resultant cost and lead time structures. It is also important o consider the variability in demand and lead time. Presents an inventory‐theoretical model that takes these considerations into account and illustrates its application with a numerical example. This model facilitates the choice of an optimal combination of the investment and the shipment lot size to minimize the total annual cost in each period as a firm progressively adopts JIT procurement.

A note on optimal order quantities for credit purchases

In this note, optimal purchase quantities are derived for firms that regularly purchase items on credit. These derivations represent modifications to the traditional economic order quantity model and include situations where handling and storage costs are charged as incurred, prepaid, or billed after usage. Buying on credit introduces float “foregone” as a relevant cost and makes discounting an integral element in the analysis. Wholesale and retail firms operating in developing marketbased economies are noted as example scenarios where the results from these derivations are managerially significant.