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EPQ Policies Considering the Holding Cost of Raw Materials under Conditions of Two-Level Trade Credit and Limited Storage Capacity

DOI: 10.4236/oalib.1105140, PP. 1-24

Subject Areas: Business Analysis, Applied Statistical Mathematics

Keywords: Economic Production Quantity (EPQ), Raw Materials, Trade Credit, Limited Storage Capacity

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Abstract

The economic production quantity model is widely used as a decision making tool. However, climate change and energy supply instability have raised the transport costs of raw materials, thereby affecting production costs. Therefore, this paper presents a new model that considers the holding costs of raw materials under conditions of two-level trade credit and limited storage capacity. Four theorems are developed to characterize the optimal solutions according to a cost-minimization strategy. Finally, a sensitivity analysis is executed to investigate the effects of the various parameters on ordering policies and the annual total relevant costs.

Cite this paper

Yen, G. , Lin, S. and Lee, A. (2019). EPQ Policies Considering the Holding Cost of Raw Materials under Conditions of Two-Level Trade Credit and Limited Storage Capacity. Open Access Library Journal, 6, e5140. doi: http://dx.doi.org/10.4236/oalib.1105140.

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