Impact of Logistic Processes on Economic Order Quantity with Quantity Discount: An Optimization Approach

Abstract

Inventory processes have significant importance in a company's logistics system and greatly influences its economic operation. Inventory management systems are used in the case of both dependent and independent products. The most used inventory model is the computation of economic order quantity model, which can be used in various types of objective functions and constraints. Logistic processes and their materials handling operations have a great impact on the optimal solution of economic order quantity problems, therefore it is important to consider logistic aspects while using EOQ. Within the frame of this article the authors describe a model considering available storage and transportation capacity, while fixed order lots as size of loading units and quantity discounts are taken into consideration. Two scenarios are discussed to validate the model and highlight the importance of logistics related constraints in computation of economic order quantity.