The Economic Order Quantity Model: Estimation of Stability and Accuracy

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MAGAZINE №1 (78) February 2017



TCHIROUKHIN V.A. - Cand.of Eng. Sc., Associate Professor, Department of Supply Chain Management National Research University Higher School of Economics (St. Petersburg, Russia) 

CATEGORY  Analytics and reviews Inventory management Optimization and mathematical modelling


The problem of the inventory management modern theory development is relevant and one of the priority directions of development of economic science to reduce logistics costs in the supply chain and to improve their efficiency.
The article deals with the model of economic order quantity (EOQ) and its place in the inventory management theory; the model base and corrected version which allows differing the accounting of costs related to the current stock storage have been analyzed; the approach for the assessment of the stability of EOQ model,
reflecting the deviation of total logistics costs of their optimal value depending on changes in the value of the order quantity have been proposed.
The accuracy of economic order quantity calculation dependson many factors: how many components of the costs are taken into account and their relationship, what version of the model is selected, but primarily on the accuracy of the parameters included in it; to evaluate the accuracy of the economic order quantity calculation
and, consequently, the total costs derived formulas to determine themean values and standard deviations of these values based on the linearization of distribution functions of random arguments; for approval of the proposed dependencies the calculations examples have been done; the possible directions of EOQ model further research have been generalized. In particular, there is need for a reasonable complexity of the model, its differentiation, without which it is impossible to bring the analytical dependences for practical applications.


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