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

Authors: K.K. Aggarwal, Chandra K. Jaggi, Alok Kumar

Addresses: Department of Operational Research, Faculty of Mathematical Sciences, New Academic Block, University of Delhi, Delhi 110007, India. ' Department of Operational Research, Faculty of Mathematical Sciences, New Academic Block, University of Delhi, Delhi 110007, India. ' Department of Operational Research, Faculty of Mathematical Sciences, New Academic Block, University of Delhi, Delhi 110007, India

Abstract: 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.

Keywords: economic order quantity; EOQ models; innovation driven demand; dynamic potential adopters; diffusion theory; inventory management; new product introduction; marketing policy; market size.

DOI: 10.1504/IJADS.2011.040883

International Journal of Applied Decision Sciences, 2011 Vol.4 No.3, pp.280 - 303

Published online: 29 Sep 2014 *

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