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On EOQ Cost Models with Arbitrary Purchase and Transportation Costs

S. Ilker Birbil (sibirbil***at***sabanciuniv.edu)
Kerem Bulbul (bulbul***at***sabanciuniv.edu)
J.B.G. Frenk (frenk***at***sabanciuniv.edu)
H.M. Mulder (hmmulder***at***few.eur.nl)

Abstract: We analyze an economic order quantity cost model with unit out-of-pocket holding costs, unit opportunity costs of holding, fixed ordering costs, and general purchase-transportation costs. We identify the set of purchase-transportation cost functions for which this model is easy to solve and related to solving a one-dimensional convex minimization problem. For the remaining purchase-transportation cost functions, when this problem becomes a global optimization problem, we propose a Lipschitz optimization procedure. In particular, we give an easy procedure which determines an upper bound on the optimal cycle length. Then, using this bound, we apply a well-known technique from global optimization. Also for the class of transportation functions related to full truckload (FTL) and less-than-truckload (LTL) shipments and the well-known carload discount schedule, we specialize these results and give fast and easy algorithms to calculate the optimal lot size and the corresponding optimal order-up-to-level.

Keywords: Inventory; EOQ cost model; transportation cost function; purchasing cost function

Category 1: Applications -- OR and Management Sciences

Citation: Birbil, S.I., Bulbul, K., Frenk, J.B.G., and Mulder, H.M. (2015). On EOQ Cost Models with Arbitrary Purchase and Transportation Costs. Journal of Industrial and Management Optimization, 11(4): 1211-1245.

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Entry Submitted: 04/22/2010
Entry Accepted: 04/23/2010
Entry Last Modified: 09/21/2015

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