Optimization of Quantity Discounts Using JIT Technique under Alternate Cost Policies

Abstract

In traditional economic order quantity modeling technique, as per the storage in a warehouse, the rate of demand is considered to be fixed, whereas in real world practice rate of demand may be dependent on time, price and stock. This paper studies problems based on allocation of order quantity under quantity discounts by revising mathematical models already studied in this area. For example, in a multi warehouse system like a super departmental store, the rate of demand is mostly subjective on the basis of stock demand. In industry, the maintenance of large stock of goods in warehouses has a higher probability of consumers as compared to an industry with small quantity of stock. Such procedures implied in single warehouses systems may be logical for level of stock that is dependent on demand. Hence, a good and large stock level mostly results in a higher profits and larger sales. The objective is to optimize profit under the effect of price variations in the form of quantity discounts based on an alternative cost functions, with the help of JIT inventory technique and analyzing a mathematical model based on it.