Utilizing the Economic Order Quantity Model to Optimize Organic Poultry Procurement and Expansion through Incremental Quantity Discounts
Abstract:
This study aims to develop a lot sizing model for the growth phase of chickens considering incremental quantity discounts from the supplier. A mathematical model is proposed to determine the Optimal Inventory Policy, which minimizes the total inventory cost across both owned and rented facilities. A solution procedure is devised to address the model, and a numerical example is provided for illustration. Sensitivity Analysis is conducted to assess the Order Quantity and total costs in response to key parameters.
The availability of incremental quantity discounts offers reduced purchasing costs, but ordering excessively large quantities poses challenges, including higher holding costs, the risk of exceeding storage capacity, and potential item deterioration due to increased cycle times. Recognizing the significance of growing items in the food supply chain, this model can prove valuable for procurement and inventory managers in making informed purchasing decisions.
Utilizing the Economic Order Quantity Model to Optimize Organic Poultry Procurement and Expansion through Incremental Quantity Discounts