Title: An economic order quantity model under constant purchasing price increments

Authors: Jayalal Wettasinghe; Kasun Lankapura

Addresses: Department of Electro-Mechanical Technology, Faculty of Engineering Technology, University of Vocational Technology, Sri Lanka ' Asian Aviation Centre (Pvt.) Ltd., Colombo Airport, Ratmalana, Sri Lanka

Abstract: The classic economic order quantity (EOQ) model developed in 1913 still has wider applications in inventory management even though it involves some restrictive assumptions. This paper presents an extension to the classic EOQ model by incorporating the assumption that the price of the item is increased at each order by a constant factor. The cost function for the total annual inventory cost was developed for two cases, i.e., the inventory holding cost is a percentage of the purchasing price of the item, and the inventory holding cost is a constant, i.e., not a percentage of the purchasing price of the item. Formulae for the optimal order quantity were derived in a similar way to the derivation of the classic EOQ model. Results of the given numerical experiments show that the derived formulae are applicable, and the total inventory cost function behaves in a similar pattern as the total inventory cost function of the classic EOQ model. Sensitivity analysis was conducted to study how sensitive the proposed EOQ to the cost parameters, and the results showed that the behaviours are similar to that of the classic EOQ model.

Keywords: economic order quantity; EOQ; inventory management.

DOI: 10.1504/IJSCIM.2024.140216

International Journal of Supply Chain and Inventory Management, 2024 Vol.5 No.1, pp.25 - 48

Accepted: 20 Dec 2023
Published online: 30 Jul 2024 *

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