Utilizing the Economic Order Quantity Model with Incremental Quantity Discounts to Optimize Organic Poultry Procurement and Expansion

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Utilizing the Economic Order Quantity Model with Incremental Quantity Discounts to Optimize Organic Poultry Procurement and Expansion.

Abstract:

This study aims to develop a lot sizing model for the production of growing chickens, considering incremental quantity discounts offered by the product supplier. A mathematical model is formulated to determine the Optimal Inventory Policy that minimizes the total inventory cost, accounting for both owned and rented facilities. A solution procedure is devised for effectively solving the model, demonstrated through a numerical example. Sensitivity Analysis is conducted to evaluate the impact of key parameters on the Order Quantity and total costs. Incremental quantity discounts have the potential to reduce purchasing costs, but ordering excessively large quantities comes with drawbacks such as increased holding costs, the risk of exceeding storage capacity, and item deterioration due to prolonged cycle times. Given the significance of growing items in the food supply chain, this model serves as a valuable tool for procurement and inventory managers in making informed purchasing decisions.

Utilizing the Economic Order Quantity Model with Incremental Quantity Discounts to Optimize Organic Poultry Procurement and Expansion.

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