Economic order quantity model: analysis and directions of further development

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MAGAZINE №3 (62) June 2014


CATEGORY Inventory management Optimization and economic-mathematical modeling Reviews and Analytics 


At the moment world logistics costs equal to 14% of global GDP or about 10-12 trillion dollars per year. These figures costs associated with armaments, public health service and other important areas of human activity.

This means that the search of practical ways and development of effective mechanisms for reducing logistics costs is a major problem, the solving of which will improve efficiency and competitiveness of enterprises.

Analysis of a number of studies has shown that the most common model of inventory control is EOQ model. However, the main disadvantage of the majority of modified calculation EOQ models, which are discussed in scientific papers, is that they take into account only one or two of plenty of characteristics that allow getting rid of ideal prerequisites of classical model and improve the classical EOQ model. In addition, some modifications of the model are debatable and cannot be recommended for the calculations.

For generation of currently lacking modified EOQ models as well as for optimal EOQ model selection it was proposed to apply the morphological method of research of rational systems.

Morphological tables for generation of new EOQ models as well as algorithm for selection of the modified EOQ model which is the most appropriate to certain business situation were developed.

The complex of modified EOQ models that takes into account multiproduct simultaneous supplies, allocation of liabilities for the implementation of logistics operations between the parties of the simple supply chain, the value added in the price of goods when calculating storage costs and different options of calculation of storage costs was developed.

The obtained results of the study will allow forming a basis of real innovative solutions to reduce logistics costs and improve the competitiveness of enterprises.


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