Robust analysis of the basic economic order quantity model

Sang Jin Kweon, Seong Wook Hwang, Jose Antonio Ventura

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

This paper considers the basic economic order quantity (EOQ) model when all parameters, such as the demand rate, the ordering cost, and the inventory holding cost, are uncertain, and furthermore, their probability information is also unknown. To address the uncertainty, we adopt a robustness-based approach. In this approach, each unknown parameter is described as a continuous value restricted to be in a prespecified interval. The objective of this paper is to build a robust inventory policy in closed-form under input data uncertainty. In order to predict the set of all possible optimal inventory scenarios when all parameters are unknown, we develop closed-form expressions that characterize the set of all possible EOQ's and corresponding minimum average costs. In addition, this paper considers a minimax approach to derive the optimal inventory policy in closed-form that minimizes the worst-error ratio.

Original languageEnglish (US)
Title of host publicationIIE Annual Conference and Expo 2014
PublisherInstitute of Industrial Engineers
Pages1613-1619
Number of pages7
ISBN (Electronic)9780983762430
StatePublished - 2014
EventIIE Annual Conference and Expo 2014 - Montreal, Canada
Duration: May 31 2014Jun 3 2014

Other

OtherIIE Annual Conference and Expo 2014
CountryCanada
CityMontreal
Period5/31/146/3/14

    Fingerprint

All Science Journal Classification (ASJC) codes

  • Industrial and Manufacturing Engineering
  • Control and Systems Engineering

Cite this

Kweon, S. J., Hwang, S. W., & Ventura, J. A. (2014). Robust analysis of the basic economic order quantity model. In IIE Annual Conference and Expo 2014 (pp. 1613-1619). Institute of Industrial Engineers.