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EPQ Inventory Model for Deteriorating Raw Materials with Two-Level Trade Credit and Limited Storage Capacity under Alternate Due Date of Payment

DOI: 10.4236/oalib.1105795, PP. 1-35

Subject Areas: Applied Statistical Mathematics, Business Analysis

Keywords: Economic Production Quantity, Deteriorating Raw Materials, Two-Level Trade Credit, Limited Storage Capacity

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Abstract

Economic production quantity (EPQ) research has typically focused on the cost of production processes, but has not employed accurate calculation to assess factors influencing ordering costs, because one of their assumptions is the raw materials that are product timely. However, the production and transport process of raw materials are influencing factors and increase the holding cost of raw materials, either by increasing or reducing the total relevant cost. [1] combined [2]’s concept of holding cost of raw materials and [3]’s two-level trade credit and limited storage capacity model to develop innovative and detailed EPQ model that considers the holding cost of non-deteriorating raw materials to closer to the real world. However, some raw materials have deteriorated should be considered. Therefore, this research extends [1]’s model to consider the holding cost of deteriorating raw materials. Four theorems for determining the optimal cycle time and the total relevant cost were developed using cost minimization. Finally, sensitivity analyses are used to find out the effects of the parameters to determine the ordering policies.

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Yen, G. , Lin, S. and Lee, A. (2019). EPQ Inventory Model for Deteriorating Raw Materials with Two-Level Trade Credit and Limited Storage Capacity under Alternate Due Date of Payment. Open Access Library Journal, 6, e5795. doi: http://dx.doi.org/10.4236/oalib.1105795.

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