AN OPTIMIZATION MODEL OF ECONOMIC ORDER QUANTITY (EOQ) FOR DETERIORATING ITEMS BASED ON EXPIRATION DATE WITH MULTIPLE PREPAYMENTS SYSTEM

Abstract

The Economic Order Quantity (EOQ) optimization Model is one of the methods used to address the problems of the management system. This optimization model is the EOQ model for depreciated goods taking into account the expiry factor of the goods with multiple payment systems. The double payment in question is a payment policy to divide upfront payments into sections with the same amount and term of payment and then be paid gradually before delivery of goods. The formulation of total inventory cost per order is determined by calculating the entire cost of the component covering the cost of purchase, booking fees, storage costs and capital costs before the goods are received. The Total cost of inventory per year, as the purpose function sought minimum value by using extreme value. The extreme value of a function is obtained by optimizing the process by conducting derivative tests. The final result is the optimal order amount and the minimum annual total cost. Numerical simulation is done through the data retrieval process at the Wafa Jaya sausage Agent. In sensitivity analysis is achieved that a very different parameter change in the total annual inventory cost is the rate of demand, upfront cost, booking fee, storage and purchase cost and expiry time. If the request rate and purchase cost parameters increase then the total cost of inventory per year is also increased and vice versa. If the expiration period increases then the total annual inventory costs will decrease, meaning the longer the expiry time of the goods then the minimum total cost of inventory per year to be issued. Keywords : EOQ optimization model, deteriorating, expiration date, multiple prepayments