EOQ formula when inventory cost is fuzzy

Various types of uncertainties and imprecision are inherent in real inventory problems. They are classically modeled using the approaches from the probability theory. However, there are uncertainties that cannot be appropriately treated by usual probabilistic models. The questions how to define inve...

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Bibliographic Details
Published in:International journal of production economics 1996-08, Vol.45 (1), p.499-504
Main Authors: Vujosevic, Mirko, Petrovic, Radivoj, Petrovic, Dobrila
Format: Article
Language:English
Subjects:
EOQ
Fuzzy arithmetic
Fuzzy logic
Fuzzy number
Imprecision
Inventory management
Optimization
Order quantity
Probability
Studies
Uncertainty
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Summary:Various types of uncertainties and imprecision are inherent in real inventory problems. They are classically modeled using the approaches from the probability theory. However, there are uncertainties that cannot be appropriately treated by usual probabilistic models. The questions how to define inventory optimization tasks in such environment and how to interpret optimal solutions arise. This paper considers the modification of EOQ formula in the presence of imprecisely estimated parameters. For example, holding and ordering costs are often not precisely known and are usually expressed by linguistic terms such as: ”Holding cost is approximately of value c h ″, or: “Ordering cost is about value c o or more”. These imprecise parameters are presented by fuzzy numbers, defined on a bounded interval on the axis of real numbers. Alternative approaches to determining the optimal order quantity in a fuzzy environment are developed, illustrated by a selection of examples, and discussed.
ISSN:0925-5273
1873-7579
DOI:10.1016/0925-5273(95)00149-2