Total discount policy and two warehouses strategy to store raw materials with Economic Order Quantity model

Abstract

This study introduced an Economic Order Quantity (EOQ) model with payment in advance to purchase high-price raw materials. We relax and change some assumptions that were considered in earlier researches. At first we considered transportation cost as a linear function. Total discount policy is considered instead of incremental discount one. Also we developed model based on two warehouses strategy to store raw material in which holding cost is different for each of warehouses. We show that the model of this problem is shown to be a mixed-integer-nonlinear-programming type and in order to solve it, a simulated annealing approach is used. At the end, a numerical example is given to demonstrate the applicability of the proposed methodology in real world inventory control problems. © 2009 Asian Network for Scientific Information.