A note on "Khouja and Park, optimal lot sizing under continuous price decrease, Omega 31 (2003)"
Omega , Volume 33 - Issue 6 p. 467- 471
Khouja and Park  analyze the problem of optimizing the lot size under continuous price decrease. They show that the classic EOQ formula can lead to far from optimal solutions and develop an alternative lot size formula using the software package Mathematica. This formula is more exact, but also more complicated. In this note, we study the net present value formulation of the model, and thereby gain an insight that leads to the proposal of a modified EOQ formula. The modified EOQ formula, albeit not as accurate, is a good alternative to the formula developed by Khouja and Park, especially if mathematical complexity may hamper implementation.
|Economic order quantity, Lot sizing, Price decrease|
|Organisation||Erasmus Research Institute of Management|
Teunter, R.H. (2005). A note on "Khouja and Park, optimal lot sizing under continuous price decrease, Omega 31 (2003)". Omega, 33(6), 467–471. doi:10.1016/j.omega.2004.06.003