An Economic Order Quantity model with partial backordering and all-units discount

The classic Economic Order Quantity model assumes that the unit purchasing cost is not based on the order quantity. In practice, a supplier may offer purchasers an all-units discount. We develop a model and solution procedure for the EOQ with all-unit discounts and partial backordering at a constant...

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Bibliographic Details
Published in:International journal of production economics 2014-09, Vol.155, p.172-184
Main Authors: Taleizadeh, Ata Allah, Pentico, David W.
Format: Article
Language:English
Subjects:
All-units discount
Corporate purchasing
Discounts
EOQ
Full backordering
Inventory
Mathematical models
Order quantity
Partial backordering
Price
Pricing
Problem solving
Studies
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Summary:The classic Economic Order Quantity model assumes that the unit purchasing cost is not based on the order quantity. In practice, a supplier may offer purchasers an all-units discount. We develop a model and solution procedure for the EOQ with all-unit discounts and partial backordering at a constant rate. We show, and illustrate with a numerical example, how that model can be used to find the solution for the EOQ with discount and full backordering. A multi-factor experiment is used to gain insights into the improvement in performance of the proposed procedure relative to using the basic EOQ or the EOQ with full backordering and to identify the model parameters that have the greatest impact on the model׳s performance. •Deterministic EOQ model with full backordering and all-units discount is developed.•Deterministic EOQ model with partial backordering and all-units discount is developed.•Closed-form optimal solutions for the sub-problems are derived.•Closed-form optimal solutions are used in the overall process of comparing the cost.•Unlike most of the literature, the fixed ordering cost is not constant.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2014.01.012