AN MODEL OF ECONOMIC ORDER QUANTITY (EOQ) FOR PERISHABLE PRODUCT WITH BACKORDER SYSTEM AND TEMPORARY DISCOUNT

Abstract

Effective inventory management is required to control the inventory so that it can minimize expenses and maximize profits. The method that can be used to control inventory are the Economic Order Quantity model. The Economic Order Quantity (EOQ) optimization model in this final project is the EOQ optimization model for the perishable product considering allowed the existence of a shortage and the customer is willing to wait (backorder) and suppliers offer temporary discount to retailers. The optimal order policy on this EOQ model is derived by calculating the difference between the total cost when special order is placed and total cost when special order is not placed and it is called an extra profit. After formulated the Economic Order Quantity model then numerical example is given to illustrate the model and obtained total order, optimal ordering times and extra profit that will be obtained then sensitivity analysis towards changes in the related parameters. Key Words: inventory, economic order quantity, perishable, backorder temporary discount