EOQ with a correlated binomial supply

EOQ with a correlated binomial supply

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Article ID: iaor20133577
Volume: 144
Issue: 1
Start Page Number: 248
End Page Number: 255
Publication Date: Jul 2013
Journal: International Journal of Production Economics
Authors: , ,
Keywords: supply & supply chains, production
Abstract:

This paper considers a variant of the economic order quantity (EOQ) model under random supply. A binomial supply model is adopted where every item received is of imperfect quality with the same probability. We study the realistic case where the qualities of items in an order are correlated and draw useful insights, the most interesting of which is that correlation decreases the order size. Several practical correlation patterns are investigated and discussed. We also show that several commonly used models in the literature can be represented by an equivalent correlated binomial supply model.

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