A multiproduct EOQ model with inflation, discount, and permissible delay in payments under shortage and limited warehouse space

Abstract

This study considers a multiproduct economic order quantity problem where delay in payment is permissible and the retailer can benefit cash discounts. The amount of discount and the length of the grace period depend on the order quantity and all the costs increase by an inflation rate. Moreover, the shortage is backlogged and the limited warehouse space leads to a constraint for storage. We first formulate the problem into a non-linear integer-programming model and then we propose a hybrid genetic algorithm and simulated annealing (GA+SA) to solve it. Since there is no benchmark available in the literature, a GA is developed as well to validate the results obtained. The parameters of both algorithms are tuned using the Taguchi method. Finally, numerical examples are solved to evaluate the performances and to compare the efficiency of the two solution procedures.