A proposed approach to extend the Economic Order Quantity (EOQ) model using discrete event simulation

Abstract

The economic order quantity (EOQ) and the economic production quantity (EPQ) are well-known and commonly used inventory control techniques. The standard results are easy to apply but are based on a number of unrealistic assumptions. One of the assumption is that the demand is normally distributed in any interval. In several practical cases the assumption about independence of successive demands, and consequently demand normal distribution in any interval, is not supported by real data. This paper investigates the effects on the expected service level (SL) after relaxing normal distribution assumption on the demand. The present work shows a possible strategy to use classic inventory model, such as EOQ/EPQ model, adopting discrete event simulation analysis to quantify model performances under relaxed assumptions. © 2012 IFIP International Federation for Information Processing.