We consider an economic order quantity type model with unit out-of-pocket holding costs, unit opportunity costs of holding, fixed ordering costs and general transportation costs. For these models, we analyze the associated optimization problem and derive an easy procedure for determining a bounded interval containing the optimal cycle length. Also for a special class of transportation functions, like the carload discount schedule, we specialize these results and give fast and easy algorithms to calculate the optimal lot size and the corresponding optimal order-up-to-level.

EOQ-type model, exact solution, transportation cost function, upper bounds
Erasmus School of Economics
hdl.handle.net/1765/16675
Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics

Birbil, S.I, Bulbul, K, Frenk, J.B.G, & Mulder, H.M. (2009). On the Economic Order Quantity Model With Transportation Costs (No. EI 2009-22). Report / Econometric Institute, Erasmus University Rotterdam. Erasmus School of Economics. Retrieved from http://hdl.handle.net/1765/16675