Deteriorated Economic Order Quantity (EOQ) Model with Variable Ordering Cost

Abstract

The economic order quantity model is framed for analyzing the effect of variable ordering cost with deteriorated items. The objective of this model is to maximize the net profit so as to determine the order quantity. For any given number of replenishment cycles the existence of a unique optimal replenishment schedule can be obtained and further the concavity of the net profit function of the inventory system in the number of replenishments is established. The numerical analysis shows that an appropriate policy can benefit the retailer and that policy is important, especially for deteriorating items. Finally, sensitivity analyses of the optimal solution with respect to the major parameters are also studied to draw some decisions with managerial implications for competitive advantage.