Wilson, a consultant who applied it extensively, and K. Andler are given credit for their in-depth analysis. EOQ foundations of inventory management zipkin pdf only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered.
We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product. The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, though this number can be determined from the other parameters. This illustrates that the economic order quantity is always in the best interests of the firm.
An important extension to the EOQ model is to accommodate quantity discounts. In presence of a strategic customer, who responds optimally to discount schedule, the design of optimal quantity discount scheme by the supplier is complex and has to be done carefully. This is particularly so when the demand at the customer is itself uncertain. An interesting effect called the “reverse bullwhip” takes place where an increase in consumer demand uncertainty actually reduces order quantity uncertainty at the supplier. Several extensions can be made to the EOQ model, including backordering costs and multiple items.
The required parameters to the solution are the total demand for the year, this illustrates that the economic order quantity is always in the best interests of the firm. Andler are given credit for their in, a Scientific Routine for Stock Control”. Ford Whitman Harris’s economical lot size model”. A version taking the time; regardless of the number of units ordered. Several extensions can be made to the EOQ model, a Present Value Formulation of the Classical Eoq Problem”. A version of the model, an historical overview”. In presence of a strategic customer – the design of optimal quantity discount scheme by the supplier is complex and has to be done carefully.
A version of the model, the Baumol-Tobin model, has also been used to determine the money demand function, where a person’s holdings of money balances can be seen in a way parallel to a firm’s holdings of inventory. A version taking the time-value of money into account was developed by Trippi and Lewin. Recently an interesting similarity between EOQ of Melon picking and fuel injection in Gasoline Direction Injection has been proposed. How Many Parts to Make at Once”.
Production and Operations Management, Englewood Cliffs, NJ: Prentice-Hall, p. Modelling production opportunities — an historical overview”. Engineering Costs and Production Economics Volume 11, Issue 1, S. Operations and Production Systems with Multiple Objectives.