EOQ-formula Modification at Storage Renting with Account to Payment Delays

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MAGAZINE №2(85) April 2018


Brodetskiy G.L.

Gerami V.D.

Shidlovskiy I.G.

CATEGORY  Optimization and mathematical modelling Inventory management


 The article presents a special modification of the EOQ-formula for a diversified EOQ-model of inventory management with account to specifics of lot deliveries. It will allow  managers to determine the optimal parameters of the inventory management strategy if it is required to take into account the following features: 1) the possibility of order payment deferral; 2) time value of money at cashflow modelling 3) incomes specifics, when the proceeds come with a delay 4) specificity of storage costs payment (in form of rent or by the occupied storage space). In addition, the article specifies some options related to the possibility of using such a formula if it is necessary to additionally take into account: a) the restriction on the allowable length of the delay in payment of goods, so that the point of receipt of the proceeds did not exceed the corresponding reorder interval duration (on average); b) the vehicle capacity. The presented research materials on optimization of supplies will allow managers to estimate the effect of permissible delays in order payments, delays in receipt of proceeds, and the factor of vehicle capacity on the parameters of the optimal strategy of inventory management. The procedures of EOQ formula modification for inventory management systems are performed in relation to interesting and business-relevant models of this type that correspond to efficient deliveries, where these delays allow to make order payments from revenue at reordering intervals. 

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