EOQ Models with Varying Holding Cost

Models of inventory management contain different parameters. An issue is observable in the classical models which can be related to the determination of the quantity of the economic order and the quantity of the economic production. In these models, the parameters like setup and holding costs and also the rate of demands are fixed. This matter causes the quantity of the economic ordering in classic model to have some differences in comparison with the real-world conditions. It should be stated that holding cost of spoiled and useless products is not always fixed and so the costs increase by passing the time. This paper is an attempt to develop classical EOQ models by considering holding cost as an increasing function of the ordering cycle length. So the classical EOQ models are developed, and the related optimum quantity to the ordering cycle length, economic ordering quantity, and the optimum total cost are determined. 1. Introduction Models of inventory management contain different parameters. An issue that is observable in the classical models can be related to the determination of the quantity of the economical ordering and the quantity of the economical production. In these models the parameters like setup cost, holding cost, and also the rate of demand are fixed. This matter causes that the economic ordering quantity and the economic production quantity in classic models to have some differences in comparison with the real-world conditions. Thus, it seems necessary that the parameters, assumptions, and limitations should be considered in a manner to approach the real condition as much as possible [1]. It should be stated that the costs of holding spoiled and useless products are not always fixed and similar, and the rate of cost is increased by passing the time. Also, the rate of holding costs which is related to rental equipment can get discounts for long-term usages and can be decreasing by time passing [2]. The aim of this paper is to present some models similar to the real-world conditions. In this paper, the related parameters to the holding cost are not considered as the fixed ones, and it is regarded as the increasing function of the ordering cycle length for determining the economic ordering cycle length and the economic ordering quantity in two cases. The first case does not allow backorders and the other one permits backorders. It means that in a situation where the holding cost is a function of the ordering cycle length, we want to minimize the total amount of the costs. Holding cost should be considered as a kind of increasing function