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A note on "Khouja and Park, optimal lot sizing under continuous price decrease, Omega 31 (2003)"

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  • Teunter, Ruud

Abstract

Khouja and Park [1] analyze the problem of optimizing the lot size under continuous price decrease. They show that the classic EOQ formula can lead to far from optimal solutions and develop an alternative lot size formula using the software package Mathematica. This formula is more exact, but also more complicated. In this note, we study the net present value formulation of the model, and thereby gain an insight that leads to the proposal of a modified EOQ formula. The modified EOQ formula, albeit not as accurate, is a good alternative to the formula developed by Khouja and Park, especially if mathematical complexity may hamper implementation.

Suggested Citation

  • Teunter, Ruud, 2005. "A note on "Khouja and Park, optimal lot sizing under continuous price decrease, Omega 31 (2003)"," Omega, Elsevier, vol. 33(6), pages 467-471, December.
    • Handle: RePEc:eee:jomega:v:33:y:2005:i:6:p:467-471
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    1. Khouja, Moutaz & Park, Sungjune, 2003. "Optimal lot sizing under continuous price decrease," Omega, Elsevier, vol. 31(6), pages 539-545, December.
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    Cited by:

    1. Berling, Peter, 2008. "The capital cost of holding inventory with stochastically mean-reverting purchase price," European Journal of Operational Research, Elsevier, vol. 186(2), pages 620-636, April.
    2. Sarkar, Biswajit & Saren, Sharmila & Wee, Hui-Ming, 2013. "An inventory model with variable demand, component cost and selling price for deteriorating items," Economic Modelling, Elsevier, vol. 30(C), pages 306-310.
    3. Yang, P.C. & Wee, H.M. & Liu, B.S. & Fong, O.K., 2011. "Mitigating Hi-tech products risks due to rapid technological innovation," Omega, Elsevier, vol. 39(4), pages 456-463, August.
    4. Yao, Ming-Jong & Chu, Weng-Ming, 2008. "A genetic algorithm for determining optimal replenishment cycles to minimize maximum warehouse space requirements," Omega, Elsevier, vol. 36(4), pages 619-631, August.
    5. Yusen Xia, 2016. "Responding to supplier temporary price discounts in a supply chain through ordering and pricing decisions," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1938-1950, April.

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