Economic order quantity models with nonlinear holding costs

We consider a generalization of the classical Economic Order Quantity Model. The traditional parameters of unit cost, selling price, demand rate and set-up cost are constant but the holding cost per unit is a non-linear function of the length of time the item is held in stock. The application is to...

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Bibliographic Details
Published in:European journal of operational research 1982, Vol.9 (1), p.56-60
Main Author: Weiss, Howard J
Format: Article
Language:English
Subjects:
Costs
Economics
Inventory management
Operations research
Order quantity
Stochastic models
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Summary:We consider a generalization of the classical Economic Order Quantity Model. The traditional parameters of unit cost, selling price, demand rate and set-up cost are constant but the holding cost per unit is a non-linear function of the length of time the item is held in stock. The application is to any inventory system where the value of the item decreases non-linearily the longer it is held in stock. For the case of deterministic demands we present the cost formula and the optimal order quantity for both finite and infinite horizons. For the case of stochastic demands the cost function is examined and the optimal order amount is presented. Computational results are presented indicating the effect of the non-linearity in holding costs.
ISSN:0377-2217
1872-6860
DOI:10.1016/0377-2217(82)90010-8